Strategic Assignment_etihad.docx

ETIHAD AIRWAYS Assignment I

Contents INTRODUCTION...................................................................................................... 2 BACKGROUND........................................................................................................ 3 ETIHAD’S CORE VALUES......................................................................................... 4 COMMITMENT........................................................................................................ 4 VISION AND MISSION............................................................................................. 5 HISTORY................................................................................................................. 6 LOYALTY PROGRAM................................................................................................ 6 FINANCIAL PERFORMANCE..................................................................................... 9 FINANCIAL POSITION.............................................................................................. 9 FINANCING ACTIVITIES......................................................................................... 11 EXTERNAL ENVIRONMENT.................................................................................... 11 GENERAL ENVIRONMENT..................................................................................12 EXTERNAL ENVIRONMENT ANALYSIS.............................................................41 INDUSTRY ENVIRONMENT ANALYSIS.................................................................44 1.

Porter's 5 forces model...........................................................................44

COMPETITOR ANALYSIS..................................................................................... 65 INTERNAL ENVIRONMENT.................................................................................... 68 COMPETITIVE ADVANTAGE...................................................................................90 VALUE CHAIN ANALYSIS........................................................................................ 92 IMPORTANT ENVIRONMENTS THAT ETIHAD NEEDS TO BE AWARE OF:...............108 ARE THE VISIONS AND MISSIONS CLEAR AND MEASURABLE?............................110 REFERENCES...................................................................................................... 111

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INTRODUCTION Strategic management is the comprehensive collection of ongoing activities and processes that organizations use to systematically coordinate and align resources and actions with mission, vision and strategy throughout an organization. Strategic management activities transform the static plan into a system that provides strategic performance feedback to decision making and enables the plan to evolve and grow as requirements and other circumstances change (Dess, Gregory G., G.T. Lumpkin and Marilyn L. Taylor, 2005). Our group decided to work upon Etihad Airways, the flag carrier airline for United Arab Emirates. The name ‘Etihad’ is derived from an Arabic word which means ‘union’. In addition to its main activity of passenger transportation, Etihad controls Etihad cargo and holidays. Aside from that, they have stakes in many other airlines as well. Some examples include Air Berlin, Air Seychelles, Jat airways (Serbian national airline) and Virgin Australia to name a few. In this report we provide a detailed insight on the company’s information, performances and analyze the external and internal environment and see how they affect the company. These environments in brief are: 



External Environment o General environment o Industry environment o Competitor environment Internal Environment o Resources o Capabilities o Core competencies o Competitive advantage o Value chain analysis o Outsourcing

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BACKGROUND The slogan of Etihad Airways is ‘From Abu Dhabi to the World. Etihad is a world-leading airline based in the Persian Gulf. Etihad is currently known as one of the “Big 3” airlines based in the Middle East, the other 2 being Emirates and Qatar Airways. Etihad airways was first appointed as the flagship carrier for the United Arab Emirates (UAE) back in 2003. Since then, it has seen rapid success, becoming one of the fastest growing airlines in commercial aviation history. Etihad Airways operates approximately 1300 flights per week to 86 different destinations around the world, on every continent with the exception of Antarctica. The airline itself deals mostly with passenger transportation, but also has 2 other divisions which are: Etihad Cargo and Etihad Holidays, a cargo service and in house program, respectively. Since its first flight in 2003, Etihad has received over 30 prestigious air travel awards. The more notable awards include:

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Best Business Class in the World 2009 (World Travel Awards)

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World's Leading Airline 2009, 2010, 2011, 2012 (Wold Travel Awards)

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World's Best First Class 2010 (Skytrax)

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Best First Class catering 2010 (Skytrax)

•

Best First Class Seat 2010 (Skytrax)

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ETIHAD’S CORE VALUES Etihad airways follow 5 corporate values. They are ‘acting positively’, ‘caring about detail’, ‘taking responsibility’, ‘delivering best practice’ and ‘inspiring the customers’ (Etihad Vision, 2010). These values cover major important points which are necessary for the success of the business. Etihad believes in being open, honest and supportive in everything they do. They like anticipating the needs of the customers and always strive to be consistent. Etihad encourages staff to take the initiative, be proactive and persistent. They are very passionate and care about their customers. Delivering the best, safe and most efficient service is one of their main priorities. Etihad makes sure the people who are part of their family understand and maintain these values so that they can uphold their standard consistently.

COMMITMENT Etihad airways is really committed in its cause to become the best airline in the world. They manage to balance all aspects of the company and keep it healthy for the smooth flow of business. Nowadays the trend is to make important contributions to the environment and perform well on the corporate social responsibility platform. Companies believe that by addressing CSR and improving the environment, the profitability, risk level and the performance of an organization improves and there are long term rewards. Despite this statement being true, companies must not just focus on this aspect. Etihad shows commitment and sustainability by focusing not only on the environment and CSR, but also finances, jobs and development of local communities, diversity, staff and sponsorships (Etihad About Us, n.d). Some noticeable examples are:  





Finance (2012) o Total revenue up by 17% from 2011 to US$4.8 billion o Net profit of US$42 million Jobs and local communities o Increased number of employees in 2012 by 18% o UAE nationals comprise 22% of the workforce o All female Emirati contact Centre in Al Ain Diversity and staff o More than 14,500 staff representing 125 nationalities o Dedicated Etihad Airways Medical Centre o Regular wellness days with preventative care checks o ‘Fit 2 Fly’ leisure facilities in major residential locations Sponsorships o 10-year partnership deal with Manchester City Football Club 4

o Formula 1 Etihad Airways Abu Dhabi Grand Prix o Continued sponsorship of Harlequins Rugby Club, GAA Hurling in Ireland 

and the Etihad Stadium Melbourne Environment o 24% improvement in carbon emissions per passenger kilometer since 2006 o Invested in aviation biofuel development in Abu Dhabi and the first biofuel flight in 2012 o A successful water saving campaign for staff in 2012

VISION AND MISSION “As the National Airline of the United Arab Emirates, we seek to reflect the best of Arabian hospitality - cultured, considerate, warm and generous - as well as enhance the prestige of Abu Dhabi as a center of hospitality between East and West” “Our goal is to be a truly 21st century, global airline, challenging and changing the established conventions of airline hospitality” “As well as a relaxing experience, we also strive to make travel safe and environmentfriendly by practicing the highest global standards in both these areas” (Etihad Vision, 2010) We can see that the vision of Etihad airline is also closely linked to its Arabian heritage in particular. The vision of the airline is also to become one of the global airliners that exude a truly 21st century, where challenges, and changing environment, plus an engaging vision to break the convention, constitutes its deep rooted vision. Etihad Airways mission like any considerate corporate is to “give a refreshing welcoming to their guest, where travel should be safe and secure in an environment that is friendly, and where global standards in both terms is practiced, be it hospitality or in the technical aspects in assuring a safe journey for its guests.”

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HISTORY Etihad Airways was established as the flag carrier of the United Arab Emirates in July 2003 by Royal Decree issued by Sheikh Khalifa bin Zayed Al Nahyan. It started with an initial paid-up capital of AED500 million. Services were launched with a ceremonial flight to Al Ain on 5 November 2003. On 12 November 2003, Etihad commenced commercial operations with the launch of services to Beirut, and has gone on to become the fastest growing airline in the history of commercial aviation. In June 2004, the airline made an US$8-billion aircraft order for five Boeing 777-300ERs and 24 Airbus aircraft, including four A380-800s. The airline announced what was the largest aircraft order in commercial aviation history at the Farnborough Airshow in 2008, for up to 205 aircraft — 100 firm orders, 55 options and 50 purchase rights. As of February 2013, the airline operates passenger and cargo services to 86 destinations around the world from its home base in Abu Dhabi.

LOYALTY PROGRAM Etihad Airways is very intelligent in the way they chose to name their economy, business, and first classes. The most premier of these would be the Diamond First class, followed by the Pearl Business class, and then the Coral Economy class. Diamond is seen as the obvious most expensive and beautiful object here, a theme that is shared by the product and services waiting for Etihad's first class customers. Pearl is not considered to be as expensive as diamond, but none the less still an object of beauty to be admired. Last but not least, Coral economy class. To name their economy class “coral” was perhaps their smartest move, because corals are natural living beings, usually not bought and sold, but very beautiful nonetheless. You could say the message Etihad is trying to send here is that: Even though you are flying economy class, a cheaper option, it is still beautiful in its own regard. This instills a value into customers, making them feel that Etihad's economy class can be held in higher regard than most other airlines who do not do the same. Etihad has its own highly successful, award winning Frequent Flyer Program. Etihad's loyalty programs consists of 2 types: Etihad Guest and Etihad BusinessConnect.

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Etihad Guest- This program is Etihad's FFP, designed in order to maximize the rewards for customers, and is successful through its flexibility and lack of restrictions. Below are the benefits of being part of Etihad Guest according to their website: • Immediate rewards – with our 1MileRedemption feature, fly once and enjoy instant rewards. • No blackout periods – Guest Seats are available on all flights, and if a seat is available, you can book it. • Anytime availability – all seats, including the very last seat, are available at any time. Redeem Open Seats at a mileage cost equivalent to the commercial price of the seat. • The widest choice – redeem on flights, products or services using our exclusive Reward Shop. •Miles plus cash – decide how many miles you want to use and contribute the rest in cash using our Miles and Cash feature. You even earn miles on the actual cash spent on flights. • Miles that are worth more – one mile can be worth much more than in any other program..

What stands out here is that Etihad is able to yet again instill value into its customers by making each mile worth more in the eyes of the customer. 1 mile earned from Etihad airlines allows the customer to immediately start redeeming items at the online reward shop. The flexibility is evident through Etihad's exclusion of any blackout periods or seat choice limitations. Because Etihad Guest miles can be used and earned in countless ways, it gives customers added incentive to fly with Etihad, knowing that their mileage seems to have more value when compared to most other world class airlines. Etihad Guest miles can be used to benefit the customer in a number of ways: 1.

Create a personal account online where guests can manage and claim miles with ease.

The website 2.

Guests can immediately use any miles they earn to make purchases on Etihad's online

reward shop. This includes purchases on holidays, shopping, and more. 3.

Upgrade to the next cabin level using Etihad guest miles.

4.

Earn miles when shopping, driving, or staying with one of Etihad's program partners. 7

5.

Transfer your mileage to up to 8 family members and share your Guest mileage as

you please. 6.

Earn Etihad Tier miles/segments.

Etihad BusinessConnect- This program is quite unique and is tailored towards maximizing the benefits for businesses when flying with Etihad. Etihad goes a step further in extending the benefits of Etihad Guest to reward loyal companies and their employees for traveling with Etihad. Flying as a company or employee sees many benefits for your business. 1.

Employees of the company will earn their usual mileage but an additional 60% of the

mileage will be added for your company when your employees are flying Diamond First Class or Pearl Business Class. 2.

In Coral Economy class, your company earns 30% of the miles that employees fly,

along with the employee’s individual mileage. 3.

Miles earned from BusinessConnect can be redeemed for countless rewards, much

like for Etihad Guest.

The best example that illustrates just how beneficial BusinessConnect really is for businesses comes from Ethihad's official website: “If 7 of your company's employees take one Pearl Business Class trip to London, your business would earn enough miles to cover a Coral Economy flight to London, with almost 3000 miles left over to spend on products from the Reward Shop.”

FINANCIAL PERFORMANCE As Etihad Airways is a registered private company, it does not have obligation to post its financial statements hence, facts and figures regarding the company’s financial performance is limited to information disclosed in the company’s annual reports. Despite its young age and the financial crisis of 2008 Etihad Airways has come on top as one of the leading carriers in the Middle East region. As of yearend 2012 Etihad airways reported

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revenue was 4.8 Billion U.S. dollars, a 17% increase over the previous years. It’s net profit being 42 million U.S. dollars, a 200% increase over the previous year.

FINANCIAL POSITION A) Revenue from Sales & Services: Etihad Airways revenue in YTD 2012 was 4.8 Billion U.S. Dollars, a 17% increase over 2011’s reported 4.1 Billion U.S. dollars. This increase in revenue can be attributed to the following: •

Etihad’s code sharing and equity strategy helped the company earn an additional 600

million U.S. dollars. •

Increase in the number of passengers using Etihad Airways. o

Passengers using Etihad’s services totalled 10.2 million persons, a 23% increase over the previous year.

•

Increase in revenue from cargo services o

Etihad Cargo brought in revenue in excess of 73.8 Million U.S. dollars, up from 2011’s figure by 10%.

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Cost reduction in terms of fuel efficiency.

B) EBIT (Earnings before interest and taxes) Earnings before interest and taxes takes into accounts all profits before deducting interest and tax expenses. This figure is used to analyse and compare profitability between different companies as it negates the effects of financing and accounting decisions. As of yearend 2013, Etihad Airways EBIT was 170 Million U.S. dollars, a 24% increase over the previous year’s figure of 130 Million U.S. dollars. C) EBITDAR (Earnings before interest, taxes, depreciation, amortization and restructuring or rent costs) Earnings before interest, taxes, depreciation, amortization and restructuring or rent costs is an indicator of a company’s financial performance. Unlike EBIT in EBITDAR two additional non cash flows are included to give a better idea of the company’s profitability. EBITDAR is 9

used by firms that utilize extremely expensive assets that have to be written down over a long period of time. EBITDAR includes either rent costs or restructuring costs but not both. Commonly used by firms that have rent costs or that have undergone a significant restructuring over particular period. As of yearend 2012 Etihad Airways EBITDAR was 753 Million U.S. dollars, a 16% increase over the previous year figure of 648 Million U.S. dollars.

Code sharing or code share is a business agreement or alliance between two or more airlines where a passenger is able to buy a ticket with one of the airlines but fly or use the services of one of the other airlines, which is part of the business alliance. The major advantage of code sharing is that it allows airlines greater access to other cities without having to deploy more aircraft or create new routes and at the same time allow for simplification of bookings for passengers when using several different airlines. As of yearend 2012 Etihad Airways has 41 codeshare alliances providing over 300 destinations. At the same time Etihad Airways has also followed an aggressive equity strategy which involved the purchasing of stocks of strategically important airline corporation in order to gain a controlling interest. Its largest equity stakes are: •

40% share of AirSeychelles

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29.21% share of Air Berlin

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4.99% share of Virgin Australia

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2.987% share of Air Lingus

Etihad’s combined codeshare and equity strategy resulted in approximately 600 Million U.S. dollars of additional revenue for the airlines by year end of 2012. The strategy brought in 1.2 Million passengers to the Etihad network, most particularly Etihad’s partnership with Air Berlin resulted in more than 300,000 passengers and 130 Million U.S. dollars in revenue between both carriers.

FINANCING ACTIVITIES In 2012 Etihad Airways raised a total of 663 Million U.S. dollars from three global banks to finance the delivery of six aircraft. Four of the six aircraft were refinanced in the U.S. capital market as Ex-Im Bank guaranteed bonds. A Request for Proposal for issued for the financing 10

of nine aircrafts, totalling 1.5 Billion U.S. dollars. Additionally mandates were awarded for the sale and lease back of four more aircrafts. Etihad’s success has given the airline significant credibility over the few years of its operations. Hence as a result Etihad now enjoys lines credit from several financial institutions providing funds in excess of 6.5 Billion U.S. dollars for funding the airlines growth. Risk Management: In 2012 besides hedging to mitigate risks from foreign exchange, fuel costs and interest rates, Etihad Airways also began to hedge for carbon emissions. In 2012 Etihad’s hedging volume peaked at 3.4 Billion U.S. dollars: Etihad hedged 53% of its foreign exchange, 76% for jet fuel exposures in 2013, 38% for jet fuel exposures in 2014 and 16% for jet fuel exposures in 2015.

EXTERNAL ENVIRONMENT According to the Business dictionary, it defines External Environment as “Conditions, entities, events, and factors surrounding an organization that influence its activities and choices, and determine its opportunities and risks. It is called operating environment. The external environment is broken down into 3 parts: •

General (dimensions in the broader society that influence an industry and the firms

within it) •

Industry (set of factors that directly influences a firm and its competitive actions and

response) •

Competitor (focuses on each company against which a firm directly competes)

A firm’s strategic actions are influenced by the conditions in all three parts.

GENERAL ENVIRONMENT General environment is composed of dimensions in the broader society that influence an industry and the firms within it. The general environment is made up of seven segments: •

Demographic segment

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Economic segment

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Socio-cultural segment 11

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Technological segment

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Global segment

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Physical segment

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Political segment

Etihad airways consists of Etihad cargo and Etihad holidays as well. It operates approximately 1300 flights per week across 86 different destinations. Currently it has 89 aircrafts in its fleet with another 34 to be received 2014-2020. The target market for Etihad airways is the Middle East, Europe, Australia, Asia and Africa. However their main target markets are the Middle East and North Africa (also known as ‘MENA’: Example Bahrain, Egypt, Iran, Iraq, Israel, Jordan, Kuwait, Libya, Morocco, Oman, Qatar, Saudi Arabia, United Arab Emirates etc) and Europe. The emphasis will be laid only on these two markets from different perspectives in the demographic and economic segment.

1)

Demographic segment

Demographic segment is the identification of the market as a whole. The firm must determine the way it will segment the market and then profile each segment. Then the firm will access the advantages of marketing to each segment and will select the segment with the best potential. a)

Population size: this refers to the increase or decrease in the size of the total

population. It also involves the effects of rapid population growth on natural resources. According to the World Bank, as of 2012 the current population of MENA is 321.6 million people. MENA has had population growth of 3% annually since 1980. The declines in mortality that occurred in the past 50 years in the developing world mostly benefited infants and young children. In MENA, infant mortality (infants dying before their first birthdays) dropped from close to 200 deaths per 1,000 live births in the early 1950s to fewer than 50 deaths per 1,000 live births at the turn of the 21st century.

Ratio of Population Size in 2000 to Population Size in 1950, by Major World Regions

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According to the World Bank, the current population of Europe is 509 million. Between 1 January 1960 and 1 January 2012 the population of the EU-27 increased by 101.1 million inhabitants, which was a mean annualized growth rate of 4.3 per thousand inhabitants. One major reason for the slowdown in the natural population growth is that women in the EU have fewer children than was previously the case. In developed parts of the world, a total fertility rate of around 2.10 live births per woman is currently considered to be the replacement rate — in other words, the level at which the size of the population would remain stationary in the long-run if there were no inward or outward migration. The total fertility rate in the EU-27 was well below replacement levels in recent decades. From a low of 1.46 live births per woman in 2002, the total fertility rate in the EU-27 has subsequently seen a slight recovery in many of the EU Member States, such that the average for the whole of the EU-27 stood at 1.57 in 2011.

b)

Age structure 13

MENA

From this graph we can see that the aging population of the MENA region is comparatively less when compared to other regions (especially Europe). There is a lot of presence of youth as well. Whether these young people become healthy and productive members of their societies will depend on how well governments and civil societies invest in social, economic, and political institutions that meet their needs. The fastest growth in the youth population will be in places that are the least prepared economically: Iraq, the Palestinian Territory, and Yemen.

EUROPE 14

Ageing society represents a major demographic challenge and is linked to several issues, including, persistently low fertility rates and significant increases in life expectancy during recent decades. Improvements in the quality and availability of healthcare are likely, at least in part, to explain the latter, alongside other factors such as increased awareness of health issues, higher standards of living, or changes in workplace occupations from predominantly manual labor to tertiary activities. The average life expectancy of a new-born baby in the world was estimated at 67.9 years (for the period 2005 to 2010): the value of this indicator increased by 3.5 years compared with the period 1990 to 1995. In the EU-27, life expectancy at birth is generally higher than in most other regions of the world and stood at 79.7 years in 2009.

c)

Income distribution

MENA

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We can notice from the graph that in MENA region, the rich are getting richer, while the poor are at a stagnant level. This has always been the case in MENA because of the nature of business available there. There is no emphasis on overall development of the region. There is high income inequality.

EUROPE

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As can be seen from Figure there are significant differences in income levels between the EU Member States, and a substantial proportion of the income inequality between the citizens of the European Union can be explained by differences in incomes from one country to another. Of the EU countries, Lithuania has the lowest income level, with an average yearly equalized disposable income of EUR 5,304per person, while Luxembourg has the highest level (EUR 29,153 a year). The former socialist countries cluster together at the bottom of the scale, with average disposable incomes of under EUR 10,000. As is evident, people in the top section of the income distribution in the former socialist countries have an average income that is typical of middle-income earners in most Western European countries (France, Germany). There are three Southern European countries, Portugal, Greece and Spain, where average incomes fall between EUR 10,000 and EUR 15,000, with one of the former socialist countries, Slovenia, being grouped with them. The largest group of European countries has average incomes of between EUR 15,000and EUR 20,000, and, apart from Luxembourg, the only country where the average level exceeds EUR 20,000 is the UK.

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OPPORTUNITES

•

The increasing population in both these regions provide Etihad the opportunities to

expand to different new destinations in these regions. Aside from expansion, the statistics of population growth indicate more potential customers in the near future. •

There is heavy inequality of income distribution in the MENA region and also

Europe. The rich are getting richer while the poor are stagnant. Etihad airways is all about leisure and top class facilities. Therefore this can turn to be advantageous by ensuring that this group of people choose Etihad airways. Example: there are currently 21 flights to UK every week; 28 to Bahrain; 26 to Qatar; 25 to Kuwait. THREATS

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The inequality of income is a disadvantage as well. It restricts growth and further

development of the company because it is still not reaching it optimum potential in terms of revenue Example: 1 rich person expenditure = 5 common people expenditure. With average equal distribution of income, the rich person will spend money, as well as the other 5 common people. •

Development of human resources in the MENA region is dependent on the

development of youth by the government of the respective countries. 2)

Economic segment

Economic segment of the general environment means the economic stability in the markets that the company is competing. It includes understanding and analyzing the global market as well because policies which directly don’t have to do with you may indirectly affect your business in the short run or long run. Understanding the economic segment is important because it can have profound influence on organizational behavior and performance. Economic growth, interest rates, the availability of credit, inflation rate, foreign exchange rates, and foreign trade balances are among the most critical economic factors to be considered. Economic growth helps organizations forecast the consumer demand for products and services. After that they make critical decisions and allocate resources accordingly (expansions). Inflation and the availability of credit, among the other factors, influence 18

interest rates that organizations have to pay. High interest payments can constrict the strategic flexibility of firms by making new ventures and capacity expansions expensive. The main components of economic segment are: •

Inflation rates

•

Interest rates

•

Trade deficits or surpluses

•

Budget deficits or surpluses

•

Personal saving rate

•

Business savings rate

•

Gross domestic product

Here we will analyze the two main markets of the Etihad airways, which are MENA (Middle East and North Africa) and Europe.

a)

MENA ECONOMIC ANALYSIS

•

History

Although MENA countries suffered the consequences of weak economic activity in industrial countries in the early 1990s, the crisis triggered by Iraq's invasion of Kuwait, and unsatisfactory oil-market conditions, the region achieved positive rates of real economic growth throughout 1989-94 with GDP expanding at an annual average rate of 3.2 percent. This growth exceeded that of Africa (1.6 percent) and Latin America (2.9 percent); only Asian countries recorded higher GDP growth (7.5 percent). However growth performance varied among various country groups and countries in the region: •

Oil exporters as a group have registered declines in real GDP growth since the

beginning of the 1990s, reflecting weakening world oil markets. •

As regards non-oil exporting economies, countries that embarked earlier on economic

adjustment and structural reform programs--including Israel, Jordan, Mauritania, Morocco, and Tunisia--performed relatively well, even though Jordan's economic adjustment was disrupted by the 1990-91 regional crisis, and Morocco and Tunisia suffered droughts. 19

•

Countries with civil strife and armed confrontation--such as Algeria, Djibouti,

Lebanon, Somalia, Sudan, and the Republic of Yemen--recorded generally very low or negative GDP growth, but the ending of hostilities in a number of cases has been followed by reconstruction and rehabilitation, giving impetus to growth. Inflation in MENA countries has been fairly restrained. In 1989-94, the weighted average consumer price index of the region increased annually by about 16 percent, compared with 47 percent for developing countries as a group. At the individual country level, 12 MENA countries achieved single-digit inflation during 1989-94, and five countries (Bahrain, Kuwait, Oman, Qatar, and Saudi Arabia) had better inflation performance than that of the average for industrial countries. Egypt significantly reduced inflation during this period by strengthening fiscal and monetary policies The external position of the MENA region deteriorated sharply in early 1991, but then improved steadily. As a ratio to GDP, the current account deficit (including official transfers) averaged 5 percent during 1989-94, compared with 1.3 percent in developing countries as a group. Among developing countries, sub-Saharan Africa was the only region to register larger current account imbalances. The volume of exports of the MENA region increased at an annual average rate of 5.6 percent during 1989-94, compared with 8.4 percent for developing countries as a whole. On average, export growth in oil exporters was better than in non-oil exporters, which nevertheless experienced increased export volume growth during 1991-94. The growth in import volumes in the MENA region was lower than the growth in export volumes during 1989-94-amounting to an annual average of 2.8 percent. Within the region, the annual average growth in imports of oil exporters was slower than that of the remaining countries, reflecting the sharp decline in imports by the oil exporters during 1993-94, but also the increased access to financing by some non-oil countries associated with their adjustment process. MENA countries adopted various approaches to financing external current account deficits. The GCC countries (Gulf Cooperation Council: Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates) relied heavily on using their gross foreign assets, but also resorted to some external borrowing. Non-GCC countries mainly relied on medium- and long-term loans from official sources. Inflows from private sources were important for only a few countries (Egypt, Israel, and Lebanon), while most foreign direct investment in the region was accounted for by flows to Egypt, Israel, Morocco, and Tunisia. 20

•

Current scenario

The MENA countries may be divided into two groups: (1) oil-exporters which include the six GCC countries (Bahrain, Kuwait, Qatar, Oman, Saudi Arabia, and the UAE), Algeria, Libya, Iraq, and Iran; and (2) net oil-importers which include Egypt, Jordan, Lebanon, Morocco, Syria, and Tunisia. The MENA countries had a combined GDP of about $2.9 trillion and a population of about 321 million in 2012. Most currencies in the region are pegged to the dollar or to a basket of currencies, and monetary policy is therefore largely constrained. Endowed with about 70% of the world's proven oil reserves and 50% of proven gas reserves, MENA oil-exporters play a critical role in the world energy market. Earnings from oil and gas accounted for about 73% of total exports and 78% of budget revenues in 2012. Most of the region’s oil exporters continue to post strong no hydrocarbon growth (an average of 5.5% in 2012), and fiscal and current account surpluses have been buoyed by higher oil prices in recent years. Over the medium term, stronger growth will be contingent on building diversified capacities with reduced dependence on hydrocarbons through sustained structural reforms. For the oil importers, the economic toll from the unrest, political uncertainty and weak external demand have led to weak real GDP growth of around 1% in 2011 and 2012 (as compared with an average of 5% in 2001-2010). Tourism and foreign direct investment (FDI) remain weak, and are still far below pre-revolution levels. Most businesses have retrenched. The Euro Area recession and sporadic violence have depressed economic activity in Egypt and Tunisia, while Jordan and Lebanon have been severely impacted by the spillover from the civil war in Syria. The prospects in 2013 remain challenging. We expect economic activity remain weak in Egypt, but improve in Morocco, Jordan and Tunisia.

b)

EUROPE ECONOMIC ANALYSIS

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Europe (Western) emerged from recession in the second quarter of 2013, after six consecutive quarters of declining GDP. Economic activity continued to expand in the second half of the year, but at a weak pace. Annual growth rates were negatively affected by the very strong downturn at the end of 2012 and beginning of 2013. GDP in the EU-15 therefore declined by 0.1 per cent in 2013, but project to strengthen to 1.4 and 1.8 per cent in 2014 and 2015, respectively. The continuous weak recovery from the Great Recession has caused the output level of the European Union (EU) to be 2.8 per cent below the potential. There are, however, considerable differences across countries. Among the large countries, the United Kingdom of Great Britain and Northern Ireland grew by 1.4 per cent in 2013 and can strengthen to 2.2 per cent in 2014, while France and Germany had slow growth of 0.1 per cent and 0.4 per cent, respectively, in 2013, but can pick up to 0.8 per cent and 1.9 per cent in 2014. The crisis countries are showing signs of turning the corner, but they remain in delicate positions. Italy contracted by 1.8 per cent in 2013can grow by 0.8 percent in 2014; similarly, Spain contracted by 1.2 per cent in 2013, and can return to positive growth of 0.9 per cent in 2014. Among the smaller crisis countries, Cyprus and Greece are expected to continue to contract in 2014. Export volume growth remains exceedingly low. In the euro area, export volumes grew by only 1.2 per cent in 2013. The appreciation of the euro during the year further dampened exports. As regional and global demand pick up, exports are expected to follow suit, supported by the assumed depreciation of the euro. Import volumes were even weaker in 2013, estimated to have declined for the second consecutive year. Some rebound is seen for 2014 and 2015, as regional growth improves. Although the depreciation of the euro could negatively affect imports, the evolution of demand will be the dominant factor. Euro area annual inflation was 0.7% in October 2013, down from 1.1% in September. A year earlier the rate was 2.5%. Monthly inflation was -0.1% in October 2013. European Union annual inflation was 0.9% in October 2013, down from 1.3% in September. A year earlier the rate was 2.6%. Monthly inflation was -0.1% in October 2013 (Eurostat, 2013). In October 2013, the lowest annual rates were observed in Greece (-1.9%), Bulgaria (-1.1%) and Cyprus (-0.5%), and the highest in Estonia and the United Kingdom (both 2.2%) and Finland (1.7%). Compared with September 2013, annual inflation fell in twenty-three Member States, remained stable in one and rose in four. The lowest 12-month average rates up to October 2013 were registered in Greece (-0.4%), Latvia (0.3%) and Sweden (0.5%), and the highest in Romania (3.7%), Estonia (3.5%), Croatia and the Netherlands (both 2.9%). 22

Annual inflation (%) in the euro area and European Union

For the new EU member States, countercyclical fiscal policy actions remain limited. In 2013 conventional and unconventional monetary policy measures were the main tools used to bolster economic activity in the countries with flexible exchange rates. Policy interest rates were kept near zero in the Czech Republic and cut, within the course of the year, to recordlow levels in Hungary, Poland and Romania (see figure below). In addition, the Hungarian National Bank announced the “Funding for Growth Scheme”, offering funds at zero interest rates for commercial lenders, in order to help small and medium enterprises obtain low-cost credits and to convert their foreign currency loans into the domestic currency. The Czech 23

National Bank announced direct interventions into the currency market, in order to weaken the exchange rate and to support exports, and to prevent deflation.

Opportunities

•

There is strong economic development in the GCC countries, which are Bahrain,

Kuwait, Qatar, Oman, Saudi Arabia, and the UAE. This is due to the vast amounts of oil reserves available within the country as well. Despite the Arab spring these economies are performing well, therefore strategies can be made to further segment the market and target the people from these countries. While the services to the other countries within the MENA region with slow economic growth will be the same. That is no increase or decrease. More destinations and routes can be developed within these GCC countries considering their economic climate. •

2014 seems to be showing good signs for the economy of Europe. However there are

still countries which have a long way to climb. They include Spain, Italy, and Greece. However the economy of UK is stable, which is a good sign considering they are the destination in which flight services are offered the most. The EU states are showing signs of good economy growth considering their interest rates and flexible economic policies. The reason the government of these countries are doing this is because they want their economy 24

to grow and thrive. Therefore new plans, routes and expansions can be developed for Eastern Europe, which is Czech Republic, Romania, Hungary and Poland. At the moment there are more routes to Western Europe than eastern from Etihad airways. Threats

•

The slow economic growth of some MENA countries due to the Arab spring or

general economic condition is a serious threat. MENA is one of the main markets for Etihad and are the reason behind their emergence. With slow growth and civil unrest there is less revenue generated from what can really be achieved. 3)

Socio cultural segment

This is a collection of social factors affecting a business and includes social traditions, values and beliefs, level of literacy and education, the ethical standards and state of society, the extent of social stratification, conflict, and so forth. Socio-cultural environment consists of factors related to human relationships and the impact of social attitudes and cultural values on the business of the organization. The beliefs, values and norms of a society determine how individuals and organizations should be inter-related.

This segment is important because the attitudes and values of society influence and thus are reflected in changes in a society’s economic. 1. Workforce composition (increase in the number of women, and increased ethnic and cultural diversity etc) 2. Changes in attitudes about the quality of work life 3. Environmental concerns 4. Shifts in work and career preferences, including an increase in new business formation by women 5. Shifts in product and service preferences

a)

Woman in the Arab world:

25

According to some observers, Arab women have not only gained in power and importance as economic actors in almost all of the MENA economies but are also increasingly identified in national development plans as indispensable sources for future and private sector-driven jobcreation, innovation and diversification (World Bank 2007; CAWTAR / IFC 2007; Metcalfe, 2011; Metcalfe and Rees, 2010. However with regards to political and economic participation of women, many Arab countries have still a long way to go to catch up with other regions of the developed as well as developing world (UNDP, 2006; Yuval-Davis, 2006, 2009). For example, Islamic law does guarantee women’s rights to own property and keep control of wealth brought into marriage, banks in many Arab countries still require female entrepreneurs looking for financing for their own ventures to have their husbands or brothers co-sign on loans. In addition, strict gender segregation complicates women’s lives both in business and at work and renders female employment highly expensive (Badran, 2005). In Arab countries women’s participation is the lowest in the world. The same is true for companies managed and/or owned by women (World Bank 2007, 2011).

However due to globalization, opportunities for women’s transnational network organizing has increased (Moghadam, 2010; Castells, 2010), although it is recognized that often these coalitions are restricted via class, tribe and political affiliations (Metcalfe and Rees 2010; Metcalfe, 2011). There is no doubt however, that the growth of women’s NGOs especially in field s of education, employment rights and social welfare, has contributed to feminist consciousness raising efforts, although there is great deal of variety across the region in terms of the legitimacy and their ability to act independently from political authorities (Metcalfe and Mutlaq, 2011).

Nonetheless, there has been a significant growth in the number of businesswomen’s forums (which usually have an NGO status), especially in the GCC. These organizations have facilitated efforts to educate and develop women’s knowledge in areas of employment and family rights, leadership, communication and community development. Organizations such as the Emirates Businesswomen Council, the Qatar Business Women Forum (QBWF), the Tunisian Women’s Entrepreneurs Union and the Egyptian Businesswomen Association (EBWA) provide different forms of assistance for female entrepreneurs. Some of them are

26

independent associations; others are closely connected to or form part of the local Chambers of Commerce and Industry or their national federations as special councils or committees

At the regional level, the Arab Businesswomen Council was established under the auspices of the Arab League in Cairo serving as an umbrella organization for national and local committees and in the international arena, organizations like the Arab International Women’s Forum (AIWF), founded in London in 2001, aspire to link Arab business women with their counterparts in Europe, the US and other regions of the world.

b)

Islamic beliefs:

As we all know the religion of Islam is very strict with certain mannerisms and code of conduct from fellow Muslims. Etihad is a Middle East airline and therefore they must fall in accordance with such beliefs. For example No pork, only halal food, no alcohol, conservative women dressing etc. it is very important for Etihad to follow these customs especially when their top market is MENA. They must make sure they comply with the needs of their end users to its potential. Also since MENA is not only their market, they have to be flexible and adapt when flying over Europe. For example when on Muslim territory still, no alcohol can be served until you passed the border; switching to halal food for Muslims to other food to rest of the people in delivery of service; decent dress code of the women onboard, must not be vulgar and loud.

Opportunities

•

Seeing the amount of influence women are starting to have in the Arab world is

interesting. This creates opportunities for Etihad to perform CSR activities around this topic and show their support for women, which will attract international appeal. Activities such as education programs or aid for women in these countries can be developed in order to build and strengthen further local ties.

•

The level of education for women in Arab countries is high. However they are

unemployed because of the society preference to male dominance. Educated women can be 27

recruited for Etihad and undergo a training program where they are employed in the air or on the ground. Hiring a lot of educated women, especially from these times at the Arab countries will add further diversity to the workforce. It will add quality and good will considering how times are changing and the role of women importance is increasing. Threats

•

The biggest threat in this segment can only be slip in professionalism while handling

the local customs of different countries. The staff need to be well coursed about the customs so that they provide efficient service to different types of customers accordingly. There can be no room for error because a small mistake can prove to be costly because these customs are to do with religion. For example: serving non halal food or pork to a strict Muslim by mistake. Such actions will lead to bad PR, therefore the service must be flawless.

4)

Technological segment

Technological environmental factors are meanwhile of a great importance, especially for industrial companies, which underlie a fast technological change. The increasing speed of technological changes, indicate risks or chances for a company. Particularly producing companies are affected of that fast evolution. Technology for an airline company is extremely crucial because they are proportional to each other. One cannot afford to be not updated with the latest trends and adopt them to their respective airlines. a)

Change in technology of aircrafts

When it comes to aircrafts we think of only 2 companies: airbus and Boeing. These companies have been in direct competition with each other for a very long time. Airbus is European based while Boeing is American. At present Boeing seem to have competitive edge over airbus because of their number of orders, delivery of service and cost. For example: •

Boeing 787 had 876 orders from 53 customers; while A350 had 505 orders from 32

customers •

Boeing 787 costs $150-200 million, while airbus costs $225-285 million

Latest model from Boeing, and NASA development: In the Dubai Air Show, Boeing stole the show with its new commercial aircraft model— called the 777x for the time being—which the company claims will chug down 12 percent 28

less fuel than today’s planes. It's the latest in a long string of innovations working to make airplanes more efficient in order to lower carbon emissions and cut costs for the transitioning industry. The most futuristic of the 777x’s energy-saving features is its foldable wings, which span 233 feet in flight and fold up once the plane lands, shortening the wingspan by about 20 feet. The design makes it possible to better navigate the massive vehicles around an airport, while still maximizing efficiency when flying. The company hails it as “the future of flight unfolding.” The model will be able to carry 400 passengers, while still burning 20 percent less fuel. It received 259 orders after being presented in Dubai, and is set to hit the market by 2020. Boeing’s new jet is just the latest in the green aircraft arms race. NASA and Boeing are working together on this project. They tested the first full flight test of a new high-tech wing that can redirect airflow to make the plane more aerodynamic, reduce drag, and in turn save energy. The technology, called Active Flow Control, places small computer-controlled devices on the wings that detect air patterns and can manipulate them for maximum efficiency. It comes out of NASA's Environmentally Responsible Aviation project—part of the oft-overshadowed "Aeronautics" division of the National Aeronautics and Space Administration.

b)

Technologies to improve passenger service

•

Power ports and storage

The first impact of today’s tech-toting passengers is on cabin ‘hardware’. Airlines around the world are responding to the large number of passengers carrying smartphones, notebooks, tablets and e-readers by equipping seats with power and USB ports. A number of airlines and interior suppliers are also looking how to integrate passengers’ own devices with the design of the seat. Besides creating storage space for personal electronic devices for the more spacious seating arrangements in Business Class, several seat manufacturers are also beginning to incorporate smartly designed spaces in Economy seats where passengers can store their mobile device •

Tracking & tracing

Online tracking and tracing of packages shipped via parcel delivery companies such as FedEx and DHL has been possible for years, and has even spread to other sectors such as pizza delivery. In a move to make the baggage process more transparent for customers, Delta Air 29

Lines’ ‘Track Checked Bags’ service aims to give passengers some peace of mind. As Delta scans the bag tags during each part of the journey, passengers can track their baggage in realtime as it makes its way through the Delta system. Available for domestic flights, Delta passengers can use Delta’s smartphone app to track their checked baggage with the bag tag number that they received at the time of baggage check-in. Since Delta has equipped all its domestic aircraft with GoGo’s in-flight Internet passengers can check up in the air whether their bag has made it on their flight. According to Delta, one in 20 passengers who check a bag, track their bag and as a result, and the airline has seen a significant improvement in performance and customer satisfaction. A similar service has just been launched by US Airways as well. Luggage tracking just one of the early examples of how providing passengers with real-time information will increase their experience, so expect many more personalized notification services to follow.

•

Customer service

In the past year, airlines such as Emirates, British Airways, Iberia, KLM and EVA Air have equipped their pursers with tablets. This allows the cabin crew to see which previous trips a passenger has taken with the carrier before and based on this, know their food, wine and seating preferences, or any issues a customer had during their previous travels. One of the largest initiatives in this area comes from British Airways, which has provided 2,000 senior cabin crew across its long and short-haul network with an iPad featuring its ‘Enhanced Services Platform’. Consisting of several apps that allow flight attendants to store and receive relevant passenger details in real-time, such as itineraries, meal preferences and other data items, the airline aims to offer its passengers a more tailored in-flight service.

•

Connected crew

Obviously, the next step is to connect the crew tablets to the Internet as the availability of aircraft with onboard wifi grows. This will close the customer service loop for airlines, as they will be able to connect with crew and passengers up in the air. For example, iPads used by pursers onboard British Airways’ Business Class-only service between London City Airport and New York’s JFK can already get live updates throughout the flight, thanks to the aircraft’s inflight connectivity provided by OnAir. 30

Opportunities

•

The opportunities from this scenario are that Etihad can learn from technological

changes and market research and adopt the same policies. By this I mean installing the charging port, on air wi fi, connected crew, customer service and baggage tracking as explained above. Etihad is already up to date with its technological trends in terms of fleet and services but there is always room for more improvement. Etihad is known for quality service and hospitality, and if technological needs of the customers is the latest trend, one must adapt to it and follow them. This leads to increase in service quality as well •

Boeing are coming up with new innovative technology. They are working side by side

with NASA for the future of aviation. Therefore Etihad must follow their research carefully, strategize the orders of the fleets, so that they can be ready when the time comes. Etihad has abundant financial backing therefore it wouldn’t be a problem. All they need to do is keep stability, grow upwards and stay up to date with the technological trends and machinery. Threats

•

Technology is changing every. Therefore careful planning and strategic thinking has

to be done before purchasing huge fleets from Boeing or Airbus. No matter how new the technology, there is always a better one that will come out. Therefore a certain sense of balance must be followed when making such large purchases and long term approach must be applied. Failure to do so will lead to misallocation of financial resources which will affect revenue. 5)

Political and Legal Segment

Political and legal factors are here regarded as a unit. They refer to framework given by politics. The legal frameworks, which can be binding for regions, nations or on an international basis. The frameworks deal with economic issues or issues concerning the labor market. Subsidies for instance fall in the category of economic issues. With respect to the labor law of a country, it can highly influence location decisions, too. If e.g. the dismissal protection in a country is very good, a firm may tend to choose a country with a more flexible hire-and-fire-system. Furthermore, the stability of a political system is a real important aspect for most firms. However in this segment we will analyze the Arab spring situation, since it has been a highlight for the past 2 years.

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a)

The Arab Spring

The Arab Spring is a term for the revolutionary wave of demonstrations and protests (both non-violent and violent), riots, and civil wars in the Arab world that began on 18 December 2010.By December 2013, rulers have been forced from power in Tunisia, Egypt (twice), Libya, and Yemen; civil uprisings have erupted in Bahrain and Syria; major protests have broken out in Algeria, Iraq, Jordan, Kuwait, Morocco, and Sudan; and minor protests have occurred in Mauritania, Oman, Saudi Arabia, Djibouti, Western Sahara, and the Palestinian territories. The protests have shared some techniques of civil resistance in sustained campaigns involving strikes, demonstrations, marches, and rallies, as well as the effective use of social media to organize, communicate, and raise awareness in the face of state attempts at repression and Internet censorship. The Arab Spring is widely believed to have been instigated by dissatisfaction with the rule of local governments, though some have speculated that wide gaps in income levels may have had a hand as well. Numerous factors have led to the protests, including issues such as dictatorship or absolute monarchy, human rights violations, political corruption, economic decline, unemployment, extreme poverty, and a number of demographic structural factors, such as a large percentage of educated but dissatisfied youth within the population.

b)

Effects of Arab Spring:

•

Emigration is expected to increase in those countries most affected by the Arab

Spring. Emigration to GCC countries, which already host significant shares of Arab immigrants, is expected to rise. Numerous accounts have been reported of emigrants fleeing from Northern Africa to Europe. •

In crisis situations such as the Arab Spring, the first reaction of governments is to

increase salaries and jobs in the public sector as a short-term response to social discontent. •

The public sector in the MENA region acts as a magnet for young graduates attracted

by high salaries, employment protection, and a special social status. The position of the public sector as a prime target for employment may create incentives for individuals to 32

acquire knowledge and skills in areas demanded by that sector, thus reducing the pool of qualified candidates for the private sector. •

The widespread political and social instability product of the Arab Spring and

associated uncertainty in several MENA countries has had direct negative economic effects in those countries most affected by turmoil. It has also indirectly benefitted the more stable resource-rich, labor-importing countries, notably Saudi Arabia and, to a lesser extent, Kuwait, where rising energy prices and increasing oil production fuelled GDP growth Opportunities

•

Fighting corruption and strengthening the rule of law are essential for economic

growth of any country. That is the transition that the Middle East is going through right now. Even though their economy (civil unrest states only) are at the poor receiving end, there is promise for better future development when all this is done and dusted. Therefore Etihad must continue to show support to these countries and take the opportunity to do so by not abandoning destinations or routes from these places and keep it flowing normally. In fact they can plan more services as well. For example in 2012 Etihad planned more services to Egypt despite the crisis. There is opportunity for long term results in this method; because there is always silence after the storm. Threats

•

Slow collective economic growth due to the Arab spring is affecting the airline

currently. There are less passengers because tourism is low as well. If the situation gets worse and is not resolved in the desired time period, it will affect the operations of the business. •

Public sector acts as a magnet for the youth once the civil wars are over. This is due to

the package and money that they are offered. Etihad is a public joint stock company. It lies more on the private side. Therefore there is a threat of losing good human resources to the public sector.

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6)

Global segment

a)

Qatar Airways introduces a F.C. Barcelona Boeing 777-300 ER logo jet

b)

Emirates and Jetstar Airways to codeshare

Emirates (Dubai) and Jetstar Airways (Melbourne) have announced an agreement which is set to open up new destinations for Emirates passengers across Australia, New Zealand and South East Asia as the Dubai-based airline continues to connect people, places and passions. The codeshare includes seven domestic routes in Australia to add to the 50 that Emirates already codeshares with an investor in the Jetstar Group, QANTAS Airways; four new routes in New Zealand, six new routes between Australian and New Zealand and ten international routes out of Singapore to Indonesia, Cambodia, Vietnam, Malaysia, Thailand and Hong Kong. c)

35% increase in demand for air travel will lead to a pilot shortage worldwide

34

According to a report conducted by CNN there is 35% increase in demand for air travel; tripling of the region's airplane fleet; and up to nearly 13,000 new planes needed. Released in August 2013, the Boeing Pilot and Technical Market Outlook for 2013-2032 forecasts nearly half a million new commercial airline pilots will be needed to fly all the new airplanes entering the world fleet over the next 20 years. There is also a shortage in ground crew.

Opportunities

•

Not to say Etihad must copy Qatar airlines, but something on a similar level can be

done in order to boost PR and advertising. Etihad airways are the proud sponsors of Manchester City in the Barclays Premier League, and an aircraft can be designed with their logo and colors all over it. Such an activity is only seen as an opportunity to increase your brand value and name and advertising. Such designed planes can be reserved only for the players or maybe open out to the fans of the club to when they are travelling across borders to watch the matches. •

Considering how Emirates planned to codeshare with Jetstar, Etihad can take this as

an example and study their competitors and come up with a better network to increase their routes to different countries all around the world. Code sharing can help reach out to further routes and expand your services to many more destinations. Threats

•

According to the brief CNN report above, there is predicted to be a shortage of pilots

due to increase in demand of travel (35%). Etihad is a big company with many planes in its fleet, therefore they must ready to tackle this situation from now itself before it turns into a threat in the long run. 7)

Physical segment

Aviation and the environment •

Fuel Efficiency

Fuel is the airline industry's second largest expense, exceeded only by labor. As a result, increased fuel efficiency has been a top industry priority for many years, and the industry has made giant steps in that regard. Since deregulation, many airlines have increased fuel efficiency nearly 65 percent by:

35

o

investing in new, environmentally efficient aircraft and engines;

o

lowering cruising speeds;

o

using computers to determine optimum fuel loads and to select altitudes and routes

that minimize fuel burn; o

using flight simulators rather than real aircraft for pilot training;

o

Keeping aircraft exteriors clean to minimize aerodynamic drag.

Most important, the airlines have invested, and continue to invest, billions of dollars in new aircraft and engines that are far more efficient than the models they replace. The Airbus A320 and Boeing 737-300, for example, transport twice as many revenue passenger miles per gallon of fuel than the DC-9 and earlier versions of the 737. In addition, they emit smaller amounts of the gases of concern to scientists studying global warming and other environmental issues.

The airlines, through international aviation planning groups, participate in various working groups on aviation environmental protection. These groups are looking at many options for the reduction of aviation emissions, including operational measures and market mechanisms. Airline representatives also have participated in the development of the United Nations' Intergovernmental Panel on Climate Change (IPCC) report on aviation's contribution to the atmosphere, the first international environmental examination of any sector •

Aircraft Emissions

Airline efforts to reduce emissions date back to the 1960s, with the earliest efforts focused on reducing the highly visible smoke emitted from jet engines. By the late 1960s, engine manufacturers developed cleaner-burning combustion chambers, and the dark streaks of smoke produced by the first generation of jets all but disappeared from view.

Rising fuel prices in the 1970s led to further reductions in emissions as airlines demanded (and got) more fuel-efficient cleaner engines and aircraft from the manufacturers. A study by the General Accounting Office, published in 1992, found that aircraft emissions of 36

hydrocarbons and carbon monoxide declined 85 percent and 70 percent, respectively, between 1976 and 1988, as more fuel-efficient aircraft entered the fleet. Emissions of nitrogen oxide rose slightly during the period studied, by about 12 percent, because of the higher engine temperatures required to increase fuel efficiency and reduce other emissions. Compared with the first generation of jets, however, today's aircraft produce less than onequarter of the total amount of these three pollutants (HC, CO and NOx) per landing and takeoff cycle.

While the increase in nitrogen oxide is a concern, it is important to note that aircraft emit small amounts of NOx relative to other sources - about 2-4 percent of total man-made NOx emissions. The engine manufacturers, the airlines, and the government are actively looking for ways to significantly reduce those emissions in the future. Since NOx results from burning petroleum products at very high temperatures, researchers are studying ways to lower the temperature inside a jet engine during high-power operations, without jeopardizing the fuel-efficiency gains and the reductions in other emissions achieved with the hotter engines. Airlines account for less than 3 percent of total CO2 emissions from the burning of fossil fuels such as wood, gas and oil. To cut aircraft emissions of CO2 further, airlines would have to find a way to power their aircraft without burning fossil fuels, which appears impossible at this time, or make further gains in fuel efficiency, which is where they continue to focus their efforts. As engines become more efficient, they use less fuel and emit less carbon dioxide for every mile flown. •

Aircraft Noise

Although many people do not associate noise with pollution, the noise produced by jets has been one of the airlines' biggest environmental challenges - one they have spent billions of dollars to address.

Key to their noise-reduction efforts has been the development and introduction of new technology over the years. Through various design changes, airframe manufacturers have successfully reduced the noise created by the displacement of air as jets move through the sky at high speeds. In addition, engine manufacturers have made great strides in reducing noise by reducing the velocity of engine exhaust. 37

As technological breakthroughs have occurred, airlines have replaced the oldest, noisiest jets with new ones that incorporate the new, quieter technology. The first generation of jets, such as the Boeing 707, were replaced during the 1970s with quieter, Stage 2 aircraft, such as the 727. Now, Stage 2 aircraft have been replaced with even quieter Stage 3 planes, such as the 757. Today, only Stage 3 aircraft are flying. Reducing noise at its source is important, but it is not the only way to lessen the impact of jet noise on communities around airports. Airlines, airports and the FAA are simultaneously pursuing other strategies. For example, the FAA with airline support, provides grants to airports for soundproofing homes, schools, churches and other structures near airports. In some cases, airport operators are using federal grants to buy homes outright, then selling the property for commercial redevelopment that is more compatible with the airport. Of course, all such efforts can be canceled out by poor planning and zoning decisions. If airports are to peacefully co-exist with their communities, it is essential that certain types of development, particularly houses, be separated from airports.

•

Recycling

The airlines have implemented a wide array of recycling programs to reduce the amount of solid waste they send to landfills and to conserve trees and other natural resources. Recycling activities include: o

aluminum can recycling by flight attendants and caterers;

o

greater use of metal utensils and ceramic dishes (rather than plastic and paper) aboard

aircraft; o

paper recycling at airline offices;

o

use of engine oil from ground vehicles to heat maintenance shops;

o

recycling of old newspapers and magazines left aboard aircraft;

o

reclamation of glycol, the fluid used to de-ice aircraft, for re-use as a runway de-icer

or as antifreeze for automobiles; 38

o

recycling of batteries, scrap metal and used aircraft parts at maintenance bases;

o

donations of unwanted, shelf-stable foods such as cereal and crackers to food banks

for the poor; o

donations to homeless shelters of partially used hotel soap and toiletries saved by

flight attendants; o

Recycling of laser printer cartridges, video tapes and other used and unwanted office

supplies. •

Fuel Management and Clean-Up

The airlines have taken steps to better minimize releases of fuel into the environment and to cleanup historic fuel contamination. These steps include:

o

removal or reconstruction of underground fuel tanks, to prevent leakage into ground

water; o

De-icing Fluid Management

The airlines have been developing a variety of methods to manage the environmental impacts of aircraft de-icing/anti-icing practices, which include:

o

development of best management practices to limit the amount of de-icing/anti-icing

fluid used, consistent with safety concerns; o

development of new de-icing procedures and products to limit the amount of de-

icing/anti-icing fluid released into the environment; o

factoring environmental considerations into purchasing decisions;

o

Exploring ways to reduce environmentally harmful aspects of de-icing/anti-icing

products.

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Opportunities

•

Etihad is Airways is committed fully to conduct its business in a way which ensures

responsible management of environmental issues. However with new environmental techniques coming up, Etihad must try to adopt as many practices as they can in order to achieve green efficiency. Being environmental friendly ads up to the goodwill of the brand name automatically. Etihad must maximize its environment friendly practices in order to satisfy the psychological needs of the growing consumerism market nowadays. •

Aside from maximizing what you can do today, there is opportunity in the growth of

bio fuels or alternative fuels. Biofuels are alternative fuels that originates from living organisms -- mostly plants and algae. They can also be derived from recycled cooking oil. Biofuels are likely to be consumed near where they’re produced, they offer potential additional benefits: emissions released during transportation will be reduced, as will transit time. Therefore, while biofuels and petroleum-based fuels have virtually the same shelf life, biofuels won’t lose as much life in transit. Biofuels are also unlikely to be stored underground or on a tanker in the same quantities as petroleum-based fuels, which lessens the associated danger of spilling. Therefore Etihad must take this opportunity and start investing in bio fuels projects in order to help the save fuel costs and have less environmental impacts. •

Etihad Airlines, through IATA, are committed to sustainable growth: a 1.5%

improvement in aviation fleet efficiency every year; From 2020 carbon emissions will be capped through carbon neutral growth; By 2050, net emissions from aviation will be half of what they were in 2005

Threats

•

As we know, the fossil fuels are depleting from earth rapidly due the rapid expansion

of the society. It is not going to last forever and will run out one day. Airlines are literally fuelled by these resources and without it, unless a new development occurs, it is almost impossible to facilitate this level of flying we see today. Since these resources are depleting, the prices of oil have been increasing over the past 2 decades. Oil is the second most thing that airlines spend on after labor. Therefore with depleting resources and increase in fuel price, this situation looks like a serious threat.

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EXTERNAL ENVIRONMENT ANALYSIS

a)

Environmental scanning

Environmental scanning can be defined as the study and interpretation of the political, economic, social and technological events and trends which influence a business, an industry or even a total market. The factors which need to be considered for environmental scanning are events, trends, issues and expectations of the different interest groups. After analyzing the external environment, the events or trends that can influence the business and the market are: •

High level of income inequality in the MENA region. It can make or break a business

in terms of revenue depending on the marketing strategies adopted. •

Slow and stagnant growth of the oil importing countries, while the GCC countries are

receiving strong economic growth. Mainly due to the oil reserves available in those countries. •

The negative effects of the Arab spring on the economy and the airline industry

•

Europe is showing signs of recovery in 2014 due to the growth of new EU countries

and their flexible economic polices •

New technological development of aircrafts which will be efficient and sustainable for

the future (Boeing collaboration with NASA – Boeing 777x) •

Investment in the development and commercialization of bio fuels or alternate fuels

•

Increase in travel demand, which will lead to shortage of pilots and staff in the future

b)

Environmental Monitoring

Environmental monitoring describes the processes and activities that need to take place to characterize and monitor the quality of the environment. The activities done by Etihad to monitor the environment are:

41

•

Despite the Arab spring, services are still being offered to these countries. There is

low tourism demand and slow economic growth, but Etihad continue to be unfazed by this and are offering more services instead. •

The strong economic development of the GCC countries and some places in Europe

(such as UK) are monitored. Therefore more services are being targeted at these regions due to their economic growth. At the same time the situation of Eastern Europe is being monitored due to their flexible economic policies. •

Etihad is up to date with its technology of aircrafts. Recently they ordered 25 mini

jumbos 777x, and 30 of the 787-10 Dreamliner, and 1 777 for the cargo for a total of $25.2 billion. This shows that they are monitoring the latest technological trends and are up to date with their direct competitors. New models of airlines bring more eco efficiency, therefore Etihad are monitoring their environmental footprint as well.

c)

Environmental Forecasting

Forecasting is attempting to predict the nature and intensity of the micro environmental and macro environmental forces that are likely to affect a firm's decision making and have an impact upon its performance in a given period. The activities which can impact performance and need to be forecasted are: •

The introduction of the Boeing 777x models into the world in 2020. This project is

collaborated with NASA in order to make models like never seen before. If this project goes as planned, it will change the face of aircraft technology in terms of eco efficiency. Etihad already forecasted this and therefore ordered 25 mini jumbos of Boeing 777x for the time being. •

The Arab spring promises to bring strong economic growth once these crisis are over.

The reason these crisis are going on is because the people want change in their society. At the moment the economic situation of these countries are not very strong. Despite this Etihad chooses to stick with them because they forecast strong economic growth after these crisis are ended.

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d)

Environmental Assessment

This is the last step of the analysis where all the findings are collected and reviewed together, and probabilities are calculated. The important findings from the external analysis which need to be assessed are: •

Fluctuating economic conditions of the Arab spring countries are affecting the

business, but services are still being offered. This is because there is promise of strong economic growth once these civil crisis are over. Not all countries in MENA are facing this problem, therefore there is some sort of balance found there. The GCC countries are well to do, therefore current strategies in the MENA region can be based around them for the time being in order to generate revenue and make up for loss. It already has been happening with increased number of flights to the GCC countries •

Technology and the airline industry go hand in hand. Airlines need to be

technologically updated not only for the safety and security of the passengers, but also for reducing environment footprints and giving good competition to competitors. With the new eco efficient models of aircrafts coming out nowadays, and future models (Boeing NASA project) Etihad assessed this situation by buying new models for its current fleet and placing orders for the future ones. It is really expensive considering the billions of dollars spent, but the reduction in fuel consumption, increase in efficiency, handling, size, and low environmental impacts makes this step justified.

43

INDUSTRY ENVIRONMENT ANALYSIS 1.

Porter's 5 forces model

Porter's five forces model is an industrial framework which is used as a tool for business planning, development, and analysis. In the airline industry, we use this model to specifically measure the competitive intensity to get a grasp on the actual attractiveness of a market. Porter's five forces model takes the following factors into consideration:

•

Threat of new entrants

•

Rivalry among competing firms

•

Threat of substitute product

•

Bargaining power of customers

•

Bargaining power of suppliers

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Threat of new entrants

The aviation industry in the United Arab Emirates is considered to be one of the most successful in the entire world. The huge market growth in recent years has been due to the success of 5 of the Middle East's top airlines. They consist of “The Big 3” : also known as Emirates, Etihad airways, and Qatar airways. The other 2 are low cost airlines Fly Dubai and Air Arabia. The strategic location of the Middle East as a potential hub that connects passengers between the Eastern and Western hemispheres, along with also it's closeness to Europe, makes the country an area with high potential and opportunity for those trying to penetrate the airline industry. The industry in itself is undergoing a redevelopment plan which will allow all 8 international airports in UAE to be able to collectively be able to serve over 300 million passengers per year. All five of UAE's main airlines, along with other smaller airlines are rapidly trying to increase their fleet and get ahead of the competition. The competition is so intense between the 5 airlines that it leaves little room for companies to try to win a market share battle with these aviation giants. Airlines have tried and failed to take advantage of UAE's strategic location and compete in the same market as those I had mentioned earlier. There is room in the future for more competition and new airlines to jump in the mix, however, the competition is so intense right now that it is decreasing each rival's revenue in order to acquire the biggest fleet despite a demand that has not skyrocketed.

There is room for the introduction of more low cost airlines in UAE's airline industry. The recent worldwide economic problems have lead many more people to opt to fly low cost airlines only, caring less about the frills and benefits of large commercial airlines and caring more about the total cost and getting from destination to destination. The big 3 airlines possess products that cater to a more high income crowd and can only be considered indirect competition to low cost airlines.

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Above is a chart showing Dubai airport's increase in international passengers in February 2010, from Airports Council International.

Rivalry among competing firms-

Obvious rivalries exist between airlines within UAE's airline industry, as well as with airlines on the outside. Etihad airlines will always face still competition in every facet of business from Emirates and Qatar airways. This is due to the similarity of the products, the penetration of the same market, and similar visions and goals. Etihad airways competes with Emirates and Qatar on all levels. The similarity of their resources and capabilities makes it very difficult for one airline to get far ahead of another airline at any given time. Any innovative breakthroughs seen by one airline will only result in the reproduction of a product/marketing plan by its rivals in order to duplicate their ability to find innovative ways to create value for customers.

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Low cost airlines Air Arabia and Fly Dubai are more rivals to one another than to Etihad airways, however they are competition nonetheless. Like I stated above earlier, low cost airlines have a good opportunity to be successful in the market with the unstable economy and recent world economic crises.

Threat of a substitute product-

There is a high threat level in terms of other airlines that can offer substitute products. These include the obvious 2: Emirates and Qatar, along with other world leading airlines operating close by out of Europe. Some of these European airlines include: Luftansa, KLM, and British Airways. These airlines all have something in common in that they are all aiming to expand to more areas of the world because they all possess high brand value and customer loyalty, along with strong strategic locations as an international hub. These world leading airlines will always aim to offer the best products and services in their own right, but are also challenging one another to keep coming up with innovative business strategies. When new technology is available, all of these airlines are first to line up for the product, as they were for the Airbus A380 when it was first launched. It is an approach that speaks of their intentions, to compete on the world stage with top brands. Product similarity will always be an issue for these companies as they have access to the best there is, therefore they are forced to also compete heavily via their marketing strategies and tactics. Etihad airways can usually be considered the second mover to Emirates, where Etihad will always move to copy or counter Emirate's marketing tactics but will make sure to wait for them to make the first move.

Bargaining power of customers

Local and global competition between airline companies is very high and continuing to increase as more and more people gain a demand to travel via commercial aviation. Customers have high bargaining power when it comes to airlines because of the vast number 47

of choices available. High competition between airlines globally ultimately give customers the power to choose which airline is right for them. On a more local scale of competition, Etihad airlines has to not only worry about Emirates and Qatar Airways, but also making their economy class appealing to customers who opt to fly low cost airlines instead. Customers stand not only to benefit from the financial competition that stands between these airlines but also their individual loyalty programs, each designed to generate a sense of membership for customers and keep them loyal to their brand. Loyalty programs are a large part of a commercial airline's appeal in the market today.

Bargaining power of suppliers:

Etihad's suppliers are similar to those of most other airlines. This would be the two global aviation giants, Boeing and Airbus. These suppliers dominate the world airline industry and have all the power, as they are the ones who decide the quality and pricing of their products. They have the option of increasing or reducing their product pricing or quality as they please because of such a high demand for their products. This makes the bargaining power of their suppliers much higher than that of Etihad Airways themselves, and makes Etihad very sensitive to changes to their suppliers. One way suppliers can appeal their product to an Airline is by choosing to deal in bulk, such as signing contracts which may result in the purchase of many planes over a period of a few years, in exchange for a cheaper initial price of each plane. 2.

Strategic dimensions

In order to achieve success competing on a global stage against top competition from around the world, Etihad must strategize according to the vision and goals that have seen them become the fastest growing full service airline in commercial aviation history. Detailed planning of the following strategic dimensions allows for Etihad to remain competitive in the market: •

Extent of technological leadership

•

Product quality & Customer service 48

•

* Pricing policies

•

Distribution channels

Extent of technological leadershipNowadays, advancements in technology have led to much more than just a globalized world. Innovation through technological advances creates value and convenience for customers of today and the future. Customer's needs and wants are changing along with the rapid rate that trends in the world change. Customers now need much more than the feeling of safety and security during flights, but look for more benefits that could make their journey better for them in any way. This is where the extent of technological leadership comes in. It is important for Etihad airways to stay on par, if not ahead of its competition through the direct use of technology. Over the past decade we have seen a shift in trends the tourism industry which has made online bookings and reservations the most sought after medium of reservation, as opposed to speaking with people directly or indirectly over a phone. The airline industry has made good use of this technology and Etihad has also adopted more advanced technology which may establish them as one of the leaders in aviation marketing strategies for the future. As a world-leading airline it is always essential to have a website that can go above and beyond just meeting a customer's demands, but exceeding them by also telling customers exactly what they want. A large part of what makes Etihad airways so great is the how they can create a relationship with a customer, showing them the value of flying Etihad. One way they do this is through their website “ www.etihad airways.com” . Their website is made with elegance, but also simplicity. If you are located in a country/city that Etihad airways flies to, the website will automatically redirect the user to the home site made specifically for that city. Etihad will automatically have a list of major cities around the world for which you can travel from your city, along with the prices which will be converted into the local currency of your country. Below is an example of what I saw when I accessed “www.etihadairways.com” from home in Bangkok.

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Breaking deals from Bangkok Abu Dhabi- Coral Economyfrom THB 26895 Dubai- Coral Economyfrom THB 26895 Dublin- Coral Economyfrom THB 43260 Frankfurt- Coral Economyfrom THB 38650 London- Coral Economyfrom THB 40175 Manchester- Coral Economyfrom THB 42025

Also on the home webpage of Etihad are the options of choosing flights, hotels, cars, and chauffeurs. The page is made in a way that is very user-friendly, integrating the input and output options of the site in a very simple, yet effective way. Although “www.etihadairways.com” is Etihad Airways's official site, a “www.whyeithad.com” site also exists. Upon visitation of that website, you can see that it is even more simple, yet still elegant. A very noticeable large number is counting upwards on the top of the page. As of right now, it says “44,131,014 guests journeys and counting”. This website was designed to answer the question “why choose Etihad over other airlines?”. There are 5 different options to click on the site, showcasing Etihad’s products and services. They read: Effortless Airports, Bliss, Thrills and Spills, Fresh and Organic, and Better Dreams. Upon clicking these options, guests will be able to see what differentiates Etihad from other airlines and why it should be their first choice carrier.

Another intriguing element to both of their websites is the “experience Etihad option”. This allows guests to see and “experience” the environment inside the aircrafts, the limousines, the lounges, and the coach buses; all before they even have to book anything. This is shown through detailed videos which showcase the full functionality and features of their products. Etihad airways truly offers world leading products and it was an intelligent move for them to be able to integrate this into their website so that potential customers could really “experience” Etihad without actually making that decision to travel. It shows that there are 50

no gimmicks with Etihad, and it sends a message that the customer will have access to all the amazing products and services they saw on the site once they choose to fly with Etihad.

Etihad airways has seen such rapid growth since its startup in 2003 that it requires technological assistance in sustaining its growth. Etihad chose to use a pricing and revenue management software called Big Data Startup to help efficiently manage the vast amount of data they were generating from the large amount of flights they operate year round. This tool helps Etihad convert data into trends, suggesting new destinations that fit their target market group, while also suggesting the best seat/price combinations. Big Data gives Etihad an edge over other airlines with its ability to generate results. Safety and reliability are keys to success in the commercial airline business. Etihad reached new heights in innovation when they introduced new technology which helps to predict aircraft maintenance faults and reduce flight delays. This technology, made by global technology company Taleris, is designed to increase the operational efficiency of Etihad's fleet. It is expected to deliver significant financial savings for Etihad Airways and improved reliability for passengers and freight customers as the technology continuously analyses data from multiple sensors on aircraft components and systems, and warns of imminent problems. The expected benefits include a reduction of unscheduled maintenance, fewer delays and cancellations, increased aircraft availability, enhanced on-time performance, and increased maintenance efficiency, reduction in maintenance costs and reduction in lost revenue costs. The service also can reduce the requirement to store expensive spare parts, which are typically stocked in case of a malfunction.

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Product quality & Customer Service Etihad airways is considered by many to be one of the best, if not the best, when it comes to the products they offer and the quality of service they provide. It easy to see why. Chauffeur service- Etihad airways offers a complementary Chauffeur service in 25 cities worldwide, including Bangkok, for all of their guests flying Diamond First Class or Pearl Business Class. This means that Etihad has luxury cars in 25 major cities around the world and special chauffeurs whom are at your service upon your landing, without extra charge. Etihad really captures the word “outstanding” by taking care of its passengers both “in the air” and “on the ground”. Etihad tries to maintain its high quality service for guests everywhere. In your personal limo service, you are able to find amenities such as complementary mineral water and a copy of the most current newspaper to keep you updated in a busy world. Etihad goes as far as using unbranded vehicles so that their guests can truly travel safely and discreetly without concerns. Lounges- Below is a list of the First and Business class lounges that Etihad airways offers its customers worldwide, including the cities they are located in:

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Cities Lounge Names Almaty

Almaty Airport Lounge

• Amman

Crown Lounge

• Athens

Swiss Lounge

• Bahrain

Delmon Lounge

• Bangalore

Oberoi Lounge

• Bangkok

Royal Orchid Lounge

• Beijing

Air China Lounge

• Beirut

MEA Lounge

• Brisbane

Air New Zealand Lounge

• Brussels

Brussels Airlines Business Lounge

• Cairo EAS Lounge and Airport Authority Lounge • Calicut

Malaba Palace

• Capetown

Bidair Premier Lounge

• Casablanca Atlas Lounge/Royal Air Maroc • Chennai

Oberoi Lounge

• Chicago

JAL Lounge

• Cochin

Oberoi Lounge

• Colombo

Araliya Lounge

• Damascus

Executive Lounge

• Dammam

First Class Lounge

• Dhaka

Sheraton Lounge

• Doha Oryx Lounge • Dublin

Etihad Airways First & Business Class Lounge

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• Frankfurt

Etihad Airways First & Business Class Lounge

• Geneva

Horizon Lounge

• Hyderabad

Plaza Premium Lounge

• Islamabad

CIP Lounge

• Istanbul

Prime Class Lounge

• Jakarta

Purah Indah Lounge, Premier Lounge or Emerald Lounge

• Jeddah

First Class Lounge

• Johannesburg

Ongololo Lounge

• Karachi

CIP Lounge

• Katmandu

Executive Lounge

• Khartoum

First Lounge

• Kuala Lumpur

Malaysian Airlines Golden Lounge

• Kuwait

Pearl Business Lounge

• Lahore

CIP Lounge

• Larnaca

Swiss Lounge

• London Heathrow

Etihad Airways First & Pearl Business Class Lounge

• Manchester Etihad Airways First & Pearl Business Class Lounge • Manila

PAGS STOP Lounge

• Melbourne

Air New Zealand Lounge

• MilanSEA Club Lounge • Minsk

National Airport Lounge

• Moscow

Domodedovo Airport Lounge

• Mumbai

Oberoi Lounge

• Munich

Atlantic Lounge

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• Muscat

Plaza Premium Lounge

• Nagoya

ANA Star Alliance Lounge

• New Delhi

ITC Sheraton Lounge

• New York

The Lounge

• Paris American Airlines Admirals Club Lounge • Peshawar

CAA Executive Lounge

• Riyadh

Attar First Class Lounge

• Seoul Asiana Lounge • Singapore

SATS Premier Club

• Sydney

Air New Zealand Lounge

• Tehran

CIP Lounge

• ThiruvananthapuramMuthoot Plaza Lounge • Tokyo

ANA Premium Lounge

• Toronto

Plaza Premium Lounge

With first and business class lounges in over 60 major cities worldwide, Etihad is able to provide outstanding pre-flight products and services across the globe. Etihad airways takes their products and services to another level, and that is evident when introducing what products and services are provided in these lounges. Etihad's most famous lounges are located in Abu Dhabi, the capital city of the UAE. Both the business and first class lounges located in Abu Dhabi stand out in their own way. Business Class Lounge- The Pearl Business class lounge offers customers the complete package, whether you are looking to dine in a 5 star setting that reflects the high quality of its air service, or if the customer wants to relax and enjoy various 15 minute spa treatments, ranging from facials, feet detoxification, and scalp massages. Guests are provided with stateof-the-art facilities that include: bathrooms with showers, ironing and shoe polishing service,

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a family/children's room, free wifi and use of the newest of Apple's iMacs, and access to pretty much anything you would need to feel comfortable and refreshed before your flight.

First Class Lounge- The Diamond First class lounge offers all of the above privileges of the Pearl Business Class lounge, and more. What makes this unique to most other airport lounges is that the Diamond first class lounge offers products and services that go beyond your expectations, rivaling 5 star hotels and restaurants. The Diamond first class lounge offers a la carte dining, a choice from a wide variety of dishes using fresh and imported ingredients served in a 5 star setting. They even go as far as providing wine that can be paired with your food, selected by professional sommeliers. Nothing says class like a “Champage Room” and “Cigar Lounge”, and that is exactly what Etihad offers in their Diamond First class lounge. Guests are able to indulge themselves in Champagne vintages such as the Brut Blanc de Blancs 2002, the Billecart-Salmon, or a choice of fine red or white wines. If you are a guest with a taste for Cigars, Etihad has some of the best selections to offer; whether it be American, or the more traditional Cuban. Pair a fine cigar of your choice with a drink such as Champagne, wine, Cognac, or Armangnac.

Customers leave the

Diamond First class lounge feeling as if they have just left a 5 star hotel or restaurant, not an airport.

On Board- Of course, Etihad cannot be an elite airline without being one of the best in terms of what they can offer their customers on board each aircraft.

Coral Economy- From the description of Etihad's airport lounges, it is easy to see Etihad's Diamond First class and Pearl Business class guests are treated much like royalty, however, that does not mean that their Coral Economy class passengers will be left out.

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Guests flying Coral Economy class have access to the same consistently excellent services that the Etihad brand represents. Economy class guests are able to choose from a choice of 3 different meal options on board, as opposed to other full service airlines that offer a choice of 2 dining options. Hot/cold drinks are available in a cafe style, while hot desserts are available to all guests. The dedication to providing excellent inflight catering has paid off, as Etihad won the Skytrax award for Best In-Flight Catering back in 2007.

Each guest will receive an on board travel pack, filled with comfort items to make overnight flights as comfortable as possible. In most economy class cabins, what is usually most complaint about is the service, the seat space, and the lack of angle of seat recline. On Etihad airways, this is not a problem. The seats are ergonomically designed to provide both comfort and relaxation. The “cradle recline” function allows guests to sit in a more natural position than they would find on most other airline economy classes, also allowing a seat pitch of between 32-34 inches. Adjustable integrated head and foot rests are also provided to ensure the passenger will be able to achieve his/her desired level of in-flight comfort.

Etihad has a very user friendly and well integrated entertainment system for each Coral Economy guest, also providing what they claim to be the largest individual touchscreens for any economy class cabin in the entire airline industry (10.4 inches). Over 600 hours of ondemand entertainment such as music, movies, tv series, and interactive games is available for guests to browse and select something that will keep them entertained. 57

All Coral Economy class seats on Etihad airways provides guests with in-seat electrical sockets, as well as Ethernet and audio sockets. Electrical sockets are absent from many world class airlines completely when many customers view them as a necessity, as charging a Laptop or Ipod/Iphone on board is a must for many passengers.

Even the lighting in Etihad's Coral Economy class is brilliant, differentiating from most other airlines. Instead of having the option of having white lights which can be turned on and off, Etihad provides Economy class “mood lighting” which creates an ambience that will keep customers relaxed throughout the flight.

Pearl Business Class- Etihad's business class seats have all of the useful functions of the Coral Economy class, and much more. The following specifications are used for Etihad's narrow-bodied aircrafts, the A319 and A320s. Having a seating arrangement of 2 seats next to each other instead of 3, the Pearl Business Class offers customers more space at their seat and for the aisle. The seat pitch for Pearl Business Class seats is 49 inches. The entertainment experience is also different when flying Pearl Business Class, offering guests a slightly larger 10.6 inch personal LCD TV. What really stands out as the big difference between Pearl Business and Coral Economy class are the dining options. Pearl Business class offers an extensive a la carte menu that will have customers choosing what they prefer, rather than what they would have between 2 or 3 items. Besides eating at designated mealtimes, Pearl Business class passengers are also allowed to order meals at any time, choosing from their “Anytime Kitchen Menu”, so that your hunger can be satisfied at any given time upon your request. Etihad has a Food and Beverage Manager aboard every flight, making sure their customers find the dishes and accompaniments best suited to what they are looking for. Like previously stated, Pearl Business class passengers are provided with excellent services before, during, and after their flights. They are allowed access to premium business class lounges worldwide, and also have the option of booking chauffeurs in major cities around the world for their post flight comfort and convenience.

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* On Etihad's wider aircrafts: the A340-500, A340-600, A330-200 and B777-300ER planes, Pearl Business Class offers an even more elegant seating option with even better functions. The noticeable differences to their other Pearl Business class seats are: The larger 15 inch personal screen, the built-in massage functions and controls of the chair, the larger personal space, and the full 180 degree reclining option, turning your seat into a full flat bed.

Diamond First Class- Etihad airways currently has 2 different seating arrangements for their aircrafts but are currently rolling out the “Diamond First Class Suite” arrangement across their fleet. The suite will be the focal point of the First Class experience.

While Pearl Business class offers their customers more than the necessities to fly, Diamond First Class does a marvelous job in generating an environment which could rival some of the best service providers on the ground. Their product is perhaps second to none.

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Customers choose Etihad Airways First Class Suites because what first stands out, at a glance, is the privacy. Guests are each given their own private cabin with sliding screen doors, giving them a sense of much desired in-flight personal space and privacy. The TV screens are a whopping 23 inches. There is even a dining option for 2, as each personal cabin can accommodate a meal for 2, in the case you would like to eat across from someone you are traveling with. Guests have a personal wardrobe space at the side of their cabins where they have the luxury of storing any clothing they may want to change into later on. Another amazing feature in this dream cabin experience is the personal mini-bar. Each cabin has its own personal mini-bar which is equipped with drinks so that guests are not troubled with having to ask the air hostess for simple drinks such as mineral water.

Luxury coaches – For guests of Etihad whom are residents of/traveling in Dubai, luxury coach buses are available to comfortably transport them from Dubai to the airport in Abu Dhabi without any prior booking required. Check in and luggage drop-off is also available in Dubai, allowing guests to avoid the hassle of carrying baggage to Abu Dhabi around or having to wait until they arrive at the airport to check-in.

It has become quite obvious that Etihad's products are of world class quality. From the airplane interior designs to the option of using luxury coaches or using one of their many first

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and business class lounges worldwide, excellence in quality is consistently spotted in Etihad Airway's products. *Pricing PoliciesDistribution channelsAs Etihad is always looking to expand its fleet and its travel destinations, it also has to have distribution channels that effectively attract their target market.

Etihad has been using a Global Distribution System called “Sabre Airline Solutions” since 2011. It provides a GDS-connected travel agencies access to Etihad's flight and schedule information. Sabre now provides: reservations, inventory, marketing, planning, e-commerce, distribution and departure control operations," according to the airline. It provides a standardized and more manageable option for an airline that is trying to expand globally. It was considered “the single largest technology enabled business change that Etihad will undertake in the last decade”

Etihad/Virgin Australia- Etihad reached a mutual agreement with Virgin airlines (Australian based) back in 2010, expanding their global network to 44 new destinations in Asia, Australia, New Zealand, Los Angeles, and the Pacific Islands. By forming partnerships such as this, Etihad excels in expanding their global network to reach as many potential customers as possible. They are world leading in terms of products and services, and always look to bring those world famous qualities to as many passengers as possible.

Partner airlines- Etihad Airways has a codeshare agreement with 40 different airlines around the world. A codeshare agreement allows Etihad to have their passengers share flights with these 40 different airlines, and vice versa. The codeshare agreement includes the following airlines:

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Aer Lingus Aer Lingus Regional Air Astana Air Berlin Air France Air Malta Air New Zealand Air Seychelles Alitalia All Nippon Airways American Airlines Asiana Airlines Bangkok Airways

Brussels Airlines

China Eastern Airlines Cyprus Airways Czech Airlines Flybe Garuda Indonesia Hainan Airlines Jet Airways Kenya Airways KLM Kuwait Airways Malaysia Airlines

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Middle East Airlines Nas Air

Niki

Olympic Air RAK Airways Philippine Airlines Royal Air Maroc S7 Airlines Saudia Safi Airways SriLankan Airlines TAP Portugal Turkish Airlines Vietnam Airlines Virgin Australia

Not only does codesharing attract more customers and expand Etihad's network, it is an extremely beneficial trend that is common amongst major airline alliances. It provides benefits for both the passengers and airlines.

Passengers benefit from codeshare flights in 2 main ways. Firstly, it becomes more convenient for passengers to book and travel from point A to C through one carrier's code, as opposed to booking from point A to B under one code, and from point B to C under another. Codeshare agreements usually mean that different airlines within the agreement will alter their flight schedules to synchronize with one another, making luggage handling and transfers between connecting flights quicker and more dependable. The second way passengers benefit from codeshare agreements is because the airlines under the agreement will be mutually responsible for problems regarding connecting flights. For example, if 2 non63

codeshared connecting flights were booked and the first caused a delay, the connecting flight would not be liable to the passenger if he/she/the baggage, were to miss the connecting flight. For codeshared flights, the connecting airline would do what they can to be accommodating for delays, such as not charge extra fees and allow late passengers on board. Overall, they would take better care of their passengers as a direct result of airlines working together.

For the airlines involved in the codeshare, various benefits exists. Firstly, if 2 airlines flew the same routes, there would be an increase in the frequency of flights on that route, giving potential passengers more options of when to fly. Secondly, codeshare agreements provide exposure for many airlines in markets where they do not normally operate. For Etihad, who operate worldwide, it is a way to imprint their brand in as many potential customers around the world as possible. Lastly, when airlines involved in codeshare agreements sacrifice some of their capacity to other airlines, they will have no operational cost. This ensures that the airlines involved will usually have a high cabin factor percentage. Etihad has chosen to call their tour offices worldwide “Holiday shops” and place them in strategic buildings or locations to try to give potential costumers value to their product. Their choice of venue happens to be shopping malls in countries all over the world. Etihad airways likes to set up offices in high end shopping mall, such as the Balwadi mall in Al Ain and Dubai. This is a strategy that works because it promotes the purchase of a holiday ticket/package to someone, as opposed to them buying luxury items in the mall. As I mentioned earlier, the website is a key attractive feature for Etihad and also plays an important role as a distribution channel. It provides relevant and useful information to curious customers while also bringing the easy of combining different types of booking packages in different cities. This includes hotels, chauffeurs, flights, etc. Etihad Airways has tour offices in countries all over the world, mostly more developed countries. This is necessary for them as a global brand to try to attract as many customers from as many destinations as possible. Etihad has over 12 offices in the Abu Dhabi region alone and this is another aggressive strategy to attract Middle Eastern customers from older and more chronologically established airlines such as Emirates and Qatar airways.

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COMPETITOR ANALYSIS As part of the famous “Big 3” full service commercial airlines of the Middle East, we chose to compare and contrast between Etihad Airways, Emirates, and Qatar Airways •

Backgound, vision, mission, objectives, value statements, culture of 2 competitors

•

Current strategy, capabilities and analysis of both competitors

Etihad Airways Background : Etihad Airways is the flag carrier airline of the United Arab Emirates. Established by Royal decree in July 2003 and based in Abu Dhabi, Etihad commenced operations in November 2003.The name derives from the Arabic word for "union" The airline operates more than 1,000 flights per week to 96 passenger and cargo destinations in the Middle East, Africa, Europe, Asia, Australia and the Americas, with a fleet of 85 Airbus and Boeing aircraft. In 2012, Etihad carried 10.3 million passengers, a 23% increase on the previous year, delivering revenues of US$ 4.8 billion and net profits of US$ 42 million.Etihad Airways is the fourth largest airline in the Middle East and it is the second largest airline in the United Arab Emirates, after the Dubai-based airline Emirates. In addition to its core activity of passenger transportation, Etihad also operates Etihad Holidays and Etihad Cargo.The airline is based at Abu Dhabi International Airportand its head office is in Khalifa City A, Abu Dhabi. Emirates Background: Emirates is an airline based in Dubai, United Arab Emirates. The airline is a subsidiary of The Emirates Group, which is wholly owned by the government of Dubai's Investment Corporation of Dubai. It is the largest airline in the Middle East, operating nearly 3,400 flights per week from its hub at Dubai International Airport, to more than 150 cities in 74 countries across six continents. Cargo activities are undertaken by the Emirates Group's Emirates SkyCargo division. The airline ranks among the top 10 carriers worldwide in terms of passenger kilometers, and has become the largest airline in the Middle East in terms of revenue, fleet size, and passengers carried as of 2007. In 2012 the airline was the fourthlargest airline in the world in terms of international passengers carried and scheduled 65

passenger-kilometers flown. The airline was the third-largest in terms of scheduled freight tonne-kilometres flown. The company also operates four of the world's longest non-stop commercial flights from Dubai to Los Angeles, San Francisco, Dallas/Fort Worth, and Houston. Qatar Airways Background: Qatar Airways is the state-owned flag carrier of Qatar. Headquartered in the Qatar Airways Tower in Doha, the airline operates a hub-and-spoke network, linking over 100 international destinations across Africa, Central Asia, Europe, Far East, South Asia, Middle East, North America, South America and Oceania from its base in Doha, using a fleet of more than 100 aircraft. The airline has more than 30,000 staff, with 17,000 people employed directly and a further 13,000 in its subsidiaries. On October 8, 2012, CEO Akbar Al Baker announced that Qatar Airways would join the Oneworld alliance. The carrier became a full member just one year later on October 30, 2013. Analysis: After looking at the similarities and differences between the 3 airlines, we can see that they have many similarities. This is due to the fact that the 3 airlines operate in the same general area of the world and are in the same market as one another. All 3 look to innovate and be more creative but it is difficult when the competition is so strong. Looking at the company vision, Etihad's stands out from the other 2 airlines. All 3 have visions and missions that speak in terms of operating at an extremely high level but Etihad's is the only one that involves the term “culture” and using it as a tool in providing hospitality and getting the customers to become more familiar with warm culture that is reminiscent of UAE. This is a strategy I have found to work well in the hotel industry. By adopting values from a flagship airline's host country, it provides the customer with a special experience. As an airline that has a very large network and operates worldwide, Etihad was intelligent in using this as their vision as it exposes customers whom may not be flying to/from UAE to a culture and quality that may want them to consider going one day. It is also a tool to attract people to fly with them but to spend time in their country.

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With regards to the objectives, there was only information on Emirates and Qatar Airways. They differ in that Emirate's objectives are clearer cut, whereas Qatar's is more general. I would consider Emirates to currently be the most successful airline of the 3 so it is without surprise that they have more specific objectives. One of their objectives is “Increase market share 40% to 55% by the end of 2014”. This is a statement of measurable goals that the company plans to accomplish before the end of the year. Emirates chooses to look at the numbers when measuring success as they can be solid indicators that can be compared with pieces of data from years past and present. Etihad's value statements are all closely related to having good values as a human being. To not only go beyond in terms of service, but to be the best human being you can be awhile on the job.

The 3 airlines use 3 different strategies currently, and change strategies often to adapt to the market in relation to the competition. Etihad airways is looking to develop technology before their competitors, which can give them exclusive access to products their competitors won't have for some time. Etihad has expanded quickly and aggressively since its initial foundation and their current strategy fits in well as it prepares to do even bigger things in the future. The current strategy of Emirates is looking at their employees as their greatest assets. They believe in training their employees extensively so that there is a large amount of talented employees who are ready to meet the demands of the expanding airline. Building strong employees eventually leads to a better image because of the consistency of good quality that comes through. Qatar airways focuses on using innovation and creativity as the key ingredient behind all aspects of the job. Qatar understands the importance to get ahead but will remain in the same tier of competitors with the other 2 airlines due to its location and market similarity.

One main difference between the airlines that was not on the chart above is that Etihad and Emirates are both part of codeshares/partnerships but not part of any large global airline alliance, while Qatar airways had recently joined Oneworld, a world leading aviation Alliance Company. Etihad and Emirates are able to operate more independently and with their own rules as a result of this difference, while also enjoying the benefits of expanding their route

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network through other airline companies. Qatar airways enjoys the benefits of a being in a reputable alliance that shares benefits, however, are confined to operate within their rules.

INTERNAL ENVIRONMENT Resources Resource is one of the main components to set up a business. It is an input into a firm’s production process, from start till the end, therefore it is very importance. A company can enable themselves to become successful if they can develop an excellent resource research and. Etihad Airways, the national airline of the United Arab Emirates, has established itself as world’s leading airline for eight years. This airline has received a range of awards that reflect its position as leading premium airline brand in the world, including ‘World’s Leading Airline’ at the World Travel Awards in 2009, 2010 and 2011. Its main business is the international air transportation of passengers. Etihad Airways also operates Etihad Holidays, Etihad C There are two types of resources:A.

Tangible resources

These resources in the company are assets that can be touch, see, and quantify. They are any of the company’s property that has a physical existence.

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Financial resources

Financial resource is the money available to a business for spending in the form of cash, liquid securities or credit lines. A company needs a to secure sufficient financial resources first to be able to begin and operate efficiently and sufficiently, as to reach the goal of success. Etihad though don’t have any financial resources as it is a private company and run by the government. They do not sell stocks.

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Organizational resources

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James Hogan - President and Chief Executive Officer

James Hogan is the President and Chief Executive of Etihad Airways since 10 September 2006. Working over more than 30 years in travel industry expertise to the Abu Dhabi-based airline. He see an opportunity in the rapid growth of the UAE’s national airline, which was serving 87 passenger and cargo destinations in the Middle East, Africa, Europe, Asia, Australia and North America while also operating 66 modern environmentally friendly aircraft). In July 2008, he signed one of the largest aircraft orders in history for up to 205 aircraft worth approximately US$43 billion at list prices, to meet the airline’s ambitious long-term growth plans. CEO Magazine named him Aviation CEO of the Year in 2008 and Visionary of the Year in 2010. James started his career in 1975 at Ansett Airlines, and subsequently held senior positions with BMI, Hertz, Forte Hotels and Gulf Air. At Hertz, his roles included directorships of the marketing, sales and operations divisions. In 1995, based in London, he joined the executive management committee as Vice President, Marketing & Sales for Europe, Middle East and Africa. In 1997, James became service director for BMI British Midland, leaving in 1998 to join the Granada Group as worldwide sales director, where he sat on the board of Forte Hotels. He returned to BMI in 1999 as chief operating officer. There he was responsible for flight and ground operations, sales and marketing, commercial, cargo, engineering and handling service companies, and was a member of the Board. James moved back to his native Australia in 2001, where he was appointed chief executive of the Tesna consortium, which was created with the aim of acquiring Ansett Airlines from

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administration, before joining Gulf Air in 2002, where he served as chief executive for four years. James is a fellow of the Royal Aeronautical Society and a former non-executive director, and member of the Board’s Audit Committee, of Gallaher Plc. In 2010, he served as the chairman of the Aviation Travel and Tourism Governors at the World Economic Forum. He currently serves as vice chairman on the Executive Committee of the World Travel and Tourism Council (WTTC) and the International Air Transport Association (IATA) Board of Governors. Following the acquisition of a majority shareholding in Air Berlin plc, in December 2011, he was named as vice chairman of the airline.

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Physical resources

Etihad Airway currently holds about 5% of Virgin Australia Holdings, while the Australian government has confirmed its decision to let Etihad Airways increase its equity in Australia Virgin about 10%. This increase was made possible by the partnership forged 2010 with the Australia administration on a ten-year strategic partnership to provide provisions for code sharing, on flight controls of their prospective frequent flyer programs and joint marketing initiatives. As a result Virgin Australia and Etihad Airways operated 24 flights a week between divide and Australia. In addition Etihad operate on all domestic Australian flights giving passenger access to about 3000 flights per week domestically. Below are Highlights of the Etihad airways join ventures with other companies. •

Hala travel management is a joint venture between Etihad airway and the BCD

travels, it's purpose is to provide travel management services for the Abu Dhabi government and it’s clients. •

Aldar Etihad Investment Properties LLC is the result of a joint venture effort between

Abu Dhabi's biggest real estate developer and at the Etihad airways. This joint venture created the Abraj Tower in Abu Dhabi and it also ineffectively created housing for recreation facilities, utility and services for its surrounding communities. 70

•

Armaguard Valuables Management LLC is a joint venture between Etihad Airways

(51 per cent) and the Linfox Group (49 per cent). Is a company that provides transportation for valuable goods around the globe and it has been in operation since the latter half of 2012. •

Amadeus Gulf LLC is a subsidiary of Etihad Airways, owned jointly by Etihad

Airways (51 per cent) and by the Amadeus IT Group S.A. (49 per cent). This subsidiary of the airline acts distributors globally with its partners in the travel and tourism industry. It represents the United Arab Emirates, the kingdom of Bahrain and the Sultanate of Oman. The airline currently serves 86 destinations in 56 countries. Furthermore it currently has four global contact centres employing over 500 people globally in 11 languages.

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Technological resources

Currently the airline is one of the biggest education and skill-training provider in UAE for students who are seeking career opportunities in the aviation industry. This development is highlighted by a Memorandum of Understanding with the Higher Colleges of Technology (HCT). HCT students are required to attain courses in aviation engineering and thereafter Etihad often provide workplace after their trainings. Specialist seminars and workshops in every area of the aviation industry are offered by HCT to its students. HH Sheikh Nahyan bin Mubarak Al Nahyan, Higher Education and Scientific Research Minister and Chancellor of the HCT, said: “This new agreement will play an important part in the development of the national workforce in the field of aviation. Etihad Airways has established itself as a leading global company and the partnership with the HCT will be mutually beneficial to both organisations and in the long term the UAE as a whole.” (Etihad Airways Facts and Figures, 2009) B.

Intangible resources

The assets you cannot touch or see but that have value. It is an asset that is rooted in the firm's history created over a period of time. As one of the biggest airline in the region and around the world at the hat has its intangible resource in firstly it's reputation, and secondly it’s massive global network. It’s unrivalled dominance domestically provide UAE with jobs as well as skilled specialists in a globally competitive market.

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

Human resources

The airlines perseverance in improving human resources has resulted in, Etihad Airways’ first group graduate managers that have successfully completed the airlines graduate management development program. These 12 graduates have started their program in October 2007 and have now taken up positions in the Etihad at network group across the globe. HaithamSubaihi, a 24 years old and from Abu Dhabi, has the role of business development manager in New York. He said: “The graduate management development programme proved highly challenging but we are delighted to have completed our training and I now look forward to flying the flag for Etihad in the USA.” The GMDP is one of at the has outstanding management training programs that involves a combination of classroom training and on-site experience. The program delivers it’s trainees with business related trainings and internationally qualified accreditations, which is underlined by National Vocational Qualifications (NVQ). In addition, the Etihad’s Emiratisationprogramme recently reached a milestone of training 150 UAE national trainees, and who are currently working for the airline. This program now boast 87 cadre pilot and 34 graduate met managers along with 29 technical engineers. Since the program began in 2007 it's trainees and graduates has become one of the most respected and credited in the industry. Pilots and engineering’s graduated from this training program are now deployed across all positions in the airline. Most importantly these program provide all staff and members with the necessary knowledge skill and competency to operate and a high standard airline environment with high standard output, further insuring the long-term quality and constantly improving nature of the airline. (Etihad Airways Facts and Figures, 2009)

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

Innovation resources

Progress and improvement is a part of Etihad’s core philosophy. In the last quarter the airline has seen a number of significant improvement in development of his product sponsorship and global network developments. While the global trend and energy prices continue to pose challenges for the aviation industry, in the Middle East this airline continues to defy the global trend and grow significantly year after year. Anthony has Courtvue on progress and development is one of the main reason why the company has sustained a strategy of measured uncontrolled growth. Through continued investment in its capital and its workforce the airline and its carriers continues to demonstrate confidence in growth. Following it’s record-breaking aircraft order the an Air show in 2008 Etihad Airways placed 40 $14 billion order on 469 injuries including maintenance complex. The airline recently also unveiled I’m on you state-of-the-art first and business-class cabins which once more defined the global standard for top-class aviation services. Laying the foundation for the future the airline has put its investment in product innovation, establishing itself as the undisputed market leader in a recovering global market. Since its establishment five years ago, Etihad has successfully inserted itself as a globally recognizable brand. As of May last year, the airline signed its biggest sponsorship deal with of one the biggest football club in the English top flight, Manchester City. In addition to the use of the Etihad logo and branding at the City of Manchester stadium, the deal will see the airline and club work together on several projects including tours to Abu Dhabi and community-based schemes for youngsters. And as the football season is underway, 73

excitement is building as Abu Dhabi accelerates towards the capital’s inaugural Formula 1™ Etihad Airways Abu Dhabi Grand Prix on November 1.Reputational resource. Sporting sponsorships along with other commercial expansions show at the house from commitment to expanding its innovative resources. Such improvements are exemplified in Etihad’s new business-class. All business-class guess will be treated with an all new chef inspired signature bread, latte glassware and salt and pepper grinders all served on luxury table mat. It’s commitment in the business class is to show its commitment for continued high-level luxury service on flight. Specifically it include the following: •

New signature bread I’m bored and inspired by the slides own chef recipe including

mushroom-filled bread, cranberry breakfast bread and also out sort of innovative and highquality pastries. •

Calling their services start right after the flight.

•

Introducing the second meal course 90 minute before landing of any long-haul flights

and ultra long-haul flights. •

A wide selection of cheeses from different countries on ceramic cheeseboard

•

To maximize the customers opportunity to sleep the flight include early morning ‘a la

minute’ and light breakfast also ‘expressed supper’ for light meals in the evening. In addition to all the improvement in culinary servings, the guest service product and service standard team has launched a new mock-up training program to display the latest improvements. This mock-up allows the cabin crew to experience and familiarize themselves with the new necessities and improvements of the program to ensure effective implementation of these changes on board. During these mark-up sessions cabin crew are offered to guy at four in the new business-class showing the equipment’s, galley loading plans and the new standard procedures after landing. As a result of these efforts to improve the services on the airline it has been rewarded with an array of prestigious awards across the world. 2012 World Travel Awards Middle East: •

Middle East’s Leading Airline 74

•

Leading Airline First Class

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Leading Airline In-Flight Entertainment

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Leading Cabin Staff

2012 Business Traveller Middle East Awards: •

Airline with the Best Economy Class

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Airline with the Best Cabin Crew

2012 Skytrax World Airline Awards •

Best First Class

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Best First Class Seats

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Best First Class Catering

Capabilities At the core, the ability for a airline to grow and compete with its competitors lies in its resources and capabilities to rise above the other airlines. Improvement and being superior to its competitors is very important to the airline because competitors would simply replicate the current standard procedure of the firm and advantages will quickly disappear. Etihad’s Capabilities: How capable of firm lies in its ability to distribute resource effectively and utilize it to the best way possible. The most common method of doing this is to have the ability to bring a new product to the market faster than its competitors. It has become a product of complex interactions between tangible and intangible resource overtime and effective human management. The airline capability lies in its ability to constantly improve in its unique value and its goods and services overtime. The key in doing so is to bring out the capabilities from instant employer and their ideas to the employee, which include: 

Unique skills and knowledge

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Functional expertise 75

Distribution The airline has over the years build a strong system that can provide its customers with their desired service the pay for. Such services include on SCI Systems such as online information system through the website, and office, as well as backstage system such as booking and scheduling system. Etihad puts great effort in producing products with awareness to the customer’s needs as well as graphical markers of each market. Which is to in turn comply with different advertisements, loyalty programs as well as sponsorships. Media advertisement: In the age of digital advertisement the airline has realized the importance of digital marketing as well as online services in a changing global era. The airlines marketing development department has adopted an innovative digital marketing strategy, which by developing an integrated website. These Digital Avenues allow the traveler to do many things including booking checking flights as well as staying in touch with the company. Specifically services provided online allow customers to book online, advanced seating selections, meal selection, online check in pririo to the flights and online flight status, in addition to interactive toward through the company facilities. The ease of use of the website gained the creditability to win the “best airline website award” in 2010 (Etihad Airways 2011). Furthermore, the website takes account of the customers loyalty programme (which will be discussed later), where customers can join programs and redeem point’s earned, such as free flights, holiday packages and upgrading travel class, online. Tehmton Cooper head of Etihad Airways e-Commerce said “Etihadcontinue to add new features to its website aimed at improving the customer online experience, as a direct result we have seen an impressive growth in online sales” (Etihad Airways 2011). In addition, Etihad has launched in 2010 a TV advertisement campaign, named “He likes, She likes,” showing the airline innovation in developing the products and services, as well as more commitment to ensure an unforgettable experience by travellers(Etihad Factsheet 2011). Etihad’s marketing strategy also takes into account the social media such as Facebbook, Twitter and Myspace.

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Sponsorships: Sponsoring specific sports event as well as sports organization gives the airline great global exposure and to potential customers. Sponsoring program of the airline can be found across the globe such as that at the high Stadium in Melbourne Australia, the international championship Formula One Grand Prix text in Abu Dhabi and Ferrari F1 team. Etihad is also the major sponsor of sport Australian hall of fame, GAA Hurling Ireland senior championship, as well as Harlequins Rugby football club and Manchester city football club. These sports events are followed by millions of fans across the world and generate immense global coverage. “Consistent with company values of hospitality and team spirit, which help to bring Abu Dhabi to the world and the world to Abu Dhabi” (Etihad Factsheet 2011). In addition to sports sponsorships the airline is also a major sponsorship for Abu Dhabi’s tourism industry. As Adu Dhabi is one of middle east’s most popular tourist destinations visitors are encouraged by Abu Dhabi tourism authority to experience reasonable prices hotels, tour operators and sports event tickets. All of which can be found and processed through the airlines website.

Loyalty programs In terms of creating a loyal idea of the brand, the airline is focused on a marketing scheme that create long-term satisfaction on the part of the customer, and exchanging the value between the customer and the company. In addition to, increasing the customer relationship management (CRM) interaction with the customer, this will create some kind of customers’ belonging to the brand. Therefore, accumulating guest miles points offered from over than 1800 flights and varieties of 200 non-flights partners’ rewards (Etihad Factsheet 2011). Program such as this allows the company to collect customer’s information week regularly for free and keep track of what the customer really need. In addition it allows the company to keep track of demographic changes and traveling patterns through the customers feedback and supporting statistics. This will help the CRM intelligence unit to personalise offers 77

targeted at some loyal customers. Nonetheless, the company has launched an Apple iPhone loyalty programme application for its members, which offers real-time points’ redemption, as well as part of its digital marketing which will promote for services and information via mobile devices (Business traveller 2010). Accordingly, Etihad loyalty programme played a major role in the company’s growth by being more customer-centric, giving Etihad in-depth understanding of customers’ needs and values, ”This programme has helped Etihad realign the marketing strategy around the brand, avoid undifferentiated superiority, and be inspirational to the individual customer” (Pepper & Roger Group 2010). Human resources

Human resources and its Ability plays a vital role in strategic implementations of a company and it is becoming more actively involved in strategic management processes. Particularly, in the hospitality industries where staff and their quality defines the quality of the company. The airline knows that this Ability will bring them new ideas generating new development through internal resources from its people. 78

The airway currently employs over 9800 staff from 126 nationalities. Out of which 1181 of fool are based in the headquarters in Abu Dhabi. Having a diverse workforce is the airlines most important asset and their well-being is highly regarded by the company because their success and growth and sustainability equals to that of the company. In addition the airline offers its staff a competitive and rewarding compensation program which shows it’s effort to continually invest in its people In local communities across the airlines network, it continues to invest in that ability of its local workforce and take a meaningful economic role in their communities. This development fully illustrates that the home base of the company is in Abu Dhabi but it is international organization that values in local talents. Furthermore, the airline offers a ray of skill training and development initiatives to both improve its workforce’s business skill as well as acoustic talent in all disciplines. As a result of having a diverse workforce the airline see it as a priority to connect people and support project that initiate long-term development and cultural awareness and understanding. As one of the main drivers of tourism, the airline plays a critical role in promoting its host country’s culture and heritage. Oxford Economics has calculated that when all of these factors are combined, Etihad Airways made a total economic contribution of nearly US$7 billion (9.6 per cent) to Abu Dhabi’s non-oil GDP in 2011. 

Omani nationals join Graduate Management Program

11 graduate managers have recently commenced their training at the headquarters in Abu Dhabi as a part of the airlines extensive recruitment drive in Oman. The 20 one-month graduate program development is designed to train and development managers to play a key role in the growth of the airline. This program include a six month workplace orientation in departments, full of by in a month of workplace training in their specific fields. The final phase include a business based project. For those who have successfully completed the program, they will attain a internationally recognized accreditation for a post graduate diploma. In Oman the airline hires 400 nationals by the end of 2012 impositions been in all areas of airline operations.

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

Financial development program

The airline has offered this comprehensive program to 7 participants in its financial development training. In the span of next year this seven participants will go through various areas of finance to gain a broad knowledge and experience in operations. At the end of their training, each will be offered an employment contract with the department that smashed to their skill experience and performances doing the training. Management Information Systems Etihad Airways, the national airline of the United Arab Emirates, has announced an agreement with aviation IT specialist Lufthansa Systems which will see the airline use the industry-leading flight planning solution Lido/Flight. The contract with Lufthansa Systems, which also includes a number of Lido/Flight add-ons and benefits, will see the Abu Dhabi-based airline optimise its operations by significantly reducing its fuel costs and emissions, whilst also benefiting from more efficient flight planning processes. Drawing on its own powerful database, Lido/Flight uses a number of parameters to calculate the optimal route for each flight, which can lead to cost savings of up to five percent. With valuable functions running in the background, we will be able to operate our flights using the best possible routings and with minimum emissions.” The contract with Lufthansa Systems includes a number of additional add-ons to Lido/Flight, including Traffic Flow Restrictions (TFR), Inflight Monitor (IFM) and FreeFlight. TFR achieves fuel savings by factoring in the impact of temporarily restricted airways, while the IFM system provides updates on airspace restrictions, airport and weather data. FreeFlight is an innovative system which allows airlines to take advantage of the emerging new correspondent concept, which improves capacity and efficiency in air traffic management. Stefan Auerbach, Senior Vice President Sales EMEA at Lufthansa Systems, added: "We are proud that Etihad has expanded its cooperation with Lufthansa Systems and will rely on our flight planning solutions to enhance their operational efficiency.

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Marketing The process of marketing can be best describes as a process of communicating the value of the product or the service to its customers. In order to successfully complete the marketing process the airline must first engage in customer analysis to identify the customer segment and meet their specific needs. The marketing process involves firstly segregating the desired market, selecting the most profitable segment, and then positioning the service or product in the mind of the customer within that segment. To successfully realize this process a strong marketing principal should be put in place with the right strategies and this is what the airline holds important. CCO Peter Baumgartner described the marketing strategy at Etihad, after receiving the 2008 marketing award i.e. the “Airline Strategy Award”, that their marketing strategy is driven by four principles. First, “to avoid undifferentiated superiority” second, “to be inspirational to the individual” (they aim to act like a small airline, through personalised service in all classes, even the economy class),third to “behave like a luxury brand but don’t lose sight of the entire spectrum”. Baumgartner says: “We are a luxury brand and position ourselves as a luxury brand, but everybody has aright to fly Etihad and experience a touch of Etihad luxury”, fourth is about promoting Abu Dhabi and lining up Abu Dhabi’s new image with Etihad’s, through the new slogan “From Abu Dhabi to the world” (Airline Strategy Awards 2008).The integrated marketing mix for services can be summarised using the 7 P’s model, which consists of Product, Price, Place, Promotion, People, Process, and Physical Evidence, below is how Etihad considered each part, with regard to the Segmentation, Targeting, Positioning (STP) process. (Place, Promotion and Process is discussed in the distribution section) Product: The core product of the airline is it transportation, with luxury us supplementary services. These services can be divided up into three main class as well as to subclasses. The key point is to provide each targeted segment with the value that suit them. Both in-flight and on the ground. Therefore differentiating product and differentiating their strategy is the airlines way to provide different service says for each segment. For example, the airline targets business travelers who are willing to pay higher prices for quality service also last-minute flyers and long-haul travelers. In comparison, two economical flyers pool may not need last minute flyer changes but cheaper prices. 81

Price: The airlines pricing strategy can be divided up into two sections. One section focuses on offering lower prices than its competitors in order to gain larger market share. Walt the other section provides services that are similar or better than its competitors a higher price. In the first instance many factors currently help the airline to offer lower prices, such as oil, knowing the government of Abu Dhabi who owns a large share of the airline gives the company great opportunity and access to cheaper oil then its competitors. According to James Hogan the CEO of Etihad Airways “Our next goal is full break-even in 2011, leading to sustainable profitability from 2012 onwards. All our indicators show that these targets are in our sights” (ASC 2010), those goals were set after the last financial crisis losses in company revenues rather than affecting the quality of services has been provided in the last three years. People: Line employees almost 100 people from more than 120 countries regardless of its type versification the company has managed a strong organization with culture and quality staff through it’s specialized training programs. The airline provides new employees with all kind of skill training to satisfy the airlines customers needs and maintain the value of the brand through useful suggestions to the customers and quality work. Specifically, all ground staff and aircrew are carefully selected because they reflect the image of the brand and they can be a source of positive influence because they’re in the face and mouth of the company. In addition the uniform of the airline is designed by a talented designer who values comfort in his design, this communicates a welcoming and hospitable value of the Arab culture and an international cosmopolitan image of the airline. The airline aims to keep developing and training it's staff through various programs to make sure ultimately it's customer are fully satisfied with the services provided by the staff. Physical evidence: In the aviation industry physical evidence complies of everything that are visible to the customer, it starts with the logo, uniforms, facilities as well as lounges and seats. The airline provides offices superior cabin designs in all classes as well as well-known fashion designer

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to design the uniform of our stuff. Ultimately all of these physical evidence should show the airlines commitment to ever in improving the customer’s perception of the service provided. Management Etihad develop the 21-month Graduate Management Development Program is designed to train and develop managers to play a key part in the growth of Etihad Airways. The program involves a six-month workplace orientation in departments, followed by eight months of workplace learning with a specified team. The final phase involves a business-based project. This management Development Program is founded in order to train and bring the human resource standard level of the company up higher. As a result, managers of Etihad are carved to become an effective, efficient, and specialised directly to Etihad’s customer base. Controlling and management of people is so important for a company to be able to be at the top, a strong team is necessary. With stronger teams of managers distributed to locations of Etihad’s main offices worldwide, Etihad is able to shape a highly productive environment in the organization. Research & Development Etihad has developed and launched an advanced new online micro-site to showcase its award-winning products in the air and on the ground. ‘Experience Etihad’, a fully interactive 3-D tour, offers a unique insight into the airline’s services across all three aircraft cabins, as well as airport lounges and limo and coach services. Among the highlights is a detailed demonstration of Etihad’s new first class suite. The micro-site also features video interviews with Etihad Airways’ on board food and beverage managers. The site is available in English, French and German, with Arabic to follow soon. Click on the ‘interactive tour’ link at the bottom of the Etihad Airways home page at etihadairways.com Biofuel In efforts to alleviate current fossil fuel crisis Etihad and Boeing airlines has combined efforts to create a new avenue of fuel source, biofuel. The BIOjet Abu Dhabi program was initiated to underline this effort. Richard Hill, chief operations officer at Etihad, told reporters the 45minute flight was the latest step towards operating commercial flights using biofuels, adding that he expected such flights to be offered within five years. The Boeing 777 made a 45minute flight Jan. 18 with one engine running on a 10% blend of biofuel and conventional jet

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fuel. The biofuel was produced from cane using Amyris’s direct sugar to hydrocarbon (DSHC) feedstock-to-fuel pathway In regards such changes, the public have taken in positive strides to Etihad’s effort toward renewable engery. Working with Abu Dhabi-based renewable energy company Masdar, the group intends to develop a supply chain that will bring aviation biofuel production and refining capabilities to the oil-rich nation. Masdar is currently developing salt-tolerant plants that could provide the raw material for the renewable fuel. It is hoped that species such as salicornia could be grown in coastal areas, allowing for large scale production of energy crops that could be grown without impacting scarce water supplies in the region. Creating fuel from sustainable sources would help Etihad curb its carbon emissions, the company said. "In collaboration with our key partners, our goal is to support and help drive the commercialization of sustainable aviation fuel in Abu Dhabi, the region and also globally," said James Hogan, president and chief executive of Etihad. "We have made some important first steps in this process and our continued focus will be to develop further initiatives such as this which will facilitate the availability of sustainable aviation biofuels for Etihad Airways in the coming years."

Core Competencies

Core competency is defined by a firm’s ability to outsource it’s competitors and maintain a competitive edge over it’s rival firms. There are four core criterias to meet in order to build core competency and the sustainable competitive advantage over its competitors. Most importantly however, to be competent at its core of companies must be valuable and unique from the customer’s point of view.

In the section below the four criteria’s will be outlined. 

Valuable

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Rare 84



Costly-to-imitate



Non-substitutable capabilities.

It is important to note the difference between ability at its core over simple competitive advantage.

Valuable capabilities Capabilities that are valuable allows the company to utilize opportunity to new Charlize threats and an internal environment. Bye effectively using this capability to explore opportunities that allows a firm to create value for the customer. In the case of the airline they are committed to providing guess with outstanding travel experience from the moment of booking to the moment of landing. Furthermore the airline represented modern an arabia which defines Abu Dhabi as a nation. Today Abu Dhabi is known around the world for having the very best five-star hotels and tourism experiences around the world. Guess who visited this state of the art travel destination are seeking maximum comfort, which requires the latest in-flight entertainment systems and experiences such as fine dining. Etihad has recently upgraded a number of its aircraft in the Business Class and Economy Class cabins, and its new Diamond First Class Suite is now available on all routes with First Class. On the ground, Etihad has introduced a range of services designed to make the travel experience as comfortable, smooth and fast as possible. In the air: Diamond First Class: In August 2009, Etihad introduced its new First Class Suite, featuring a luxurious Poltrona Frau leather seat that converts to a fully flat bed, a large wood-finished table, Arabic-styled sliding doors offering complete privacy, a 23-inch personal entertainment screen, a personal wardrobe with mirror, personal minibar, and four individual lighting options with dimmers, in-seat power points and USBs. The First Class cabin also includes a spacious and comfortable changing room with a leather fold down seat and full length illuminated mirror. Etihad’s Diamond First Class was awarded ‘World’s Best First Class’ in the Skytrax awards for two years running, as voted for by more than 18 million passengers worldwide.

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Pearl Business Class: Etihad’s Pearl Business Class, featuring a seat that converts to a fully flat bed, won the World’s Best Business Class award in 2009, as voted for in the Skytrax annual poll. New advanced Business Class seats are now being introduced, which are longer and wider, all with direct aisle access in a 1-2-1 configuration. The seats include larger meal and cocktail tables, luxurious leather headrests, armrests and ottomans upholstered by Poltrona Frau, ambient lighting with dimmer settings, more in-seat storage space and a stateof-the-art Panasonic eX2 inflight entertainment system with a 15.4 inch personal screen. Coral Economy Class: Etihad has rolled out a new service style in Economy Class. An extension of the Inspired Service philosophy already embedded in its First and Business Class cabins, the new service delivers greater levels of personal attention, touches of luxury and greater choice and flexibility. The Inspired Service in Economy Class includes hot desserts on select flights, an offering unique to Etihad, and a hot and cold café service with a wide range of hot beverages from cappuccino to green tea.This new Economy cabin offers a new interior design. Seats are ergonomically designed for comfort, with a 32 inch pitch, footrest and a deep recline. Each seat is also equipped with a handheld controller, USB port and power sockets underneath the 10.4 inch personal entertainment screen. A large pillow is provided. Small touches on the seat such as coat hooks and cup holders make the space more individual. Dining: The airline is renowned for its dining services on its first class and business classes guess Contras whatever like they like to dine from array of menu or ‘kitchen anytime’ menu, which gives the best the opportunity to dine on wine whenever they choose. In 2011 the airline introduced its first class chefs in the first-class cabin. Each inflight menu is tailored to the route, typically including at least one dish inspired by the destination, one “Taste of Arabia” dish and one Western option. On routes where there is a very high demand for particular menu items (ie Indian cuisine on flights to the Indian Subcontinent, the Kaiseki menu on flights to Japan), the menu is adjusted to include those tailored dishes and menu offerings. Guests can indulge in a selection of complimentary drinks, including a boutique list of wines hand-picked from around the world. Amenity kits: for females guess who fly first class the airline offer fashionable black cosmetic purse detailed with crystals by Swarovski. For male guess amenities include highquality shaving kit with razors and shaving cream from luxury brands.

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Both anonymity kid include basic items such as toothbrushes and toothpaste as well as earplugs socks eyeshades and products all from high-quality brands of moisturizer hand creams. On select long-haul flights the economic class gets will also receive an amenity kit containing many good-quality items in a travel pouch. Family Travel: Etihad offers a variety of products and services designed to make travelling with children more enjoyable. Etihad also offers special inflight menus for children and stateof-the-art inflight entertainment programs with more than 600 hours of movies, TV shows, music and interactive games, including a “kids only” interface. On the ground, Etihad’s signature First and Business Class lounges in Abu Dhabi, London, Manchester and Dublin offer Family Rooms equipped to keep children busy and happy, with books, toys, television and an exciting children’s menu. Further, Etihad lounges in Abu Dhabi offer nannies to watch over children, taking care that they are safe, engaged and enjoy their time at the airport. Inflight Duty Free: Etihad offers all guests the opportunity to shop inflight from the airline’s ‘exclusives’ range, featuring up to 170 products. The range is perfect for selecting last minute gifts for family and friends as well as showcasing many products that are either available exclusively to the airline industry or designed specifically for Etihad’s guests. Customers also have the opportunity to pre-order items online or via email to ensure their requested products are available on board their next flight.

On the ground: Lounges: Etihad’s First and Business Class guests receive access to luxury lounges across all destinations, in conjunction with its airline partners. In Abu Dhabi, the airline’s signature First Class lounge offers guests a range of luxury services, including a complimentary Six Senses spa, cigar lounge, champagne bar and à la carte fine dining. In the Business Class lounge, guests can enjoy a complimentary spa treatment from Six Senses spa, international buffet cuisine, business, rest and relaxation and entertainment options. In both lounges, prayer rooms are available and children can be kept entertained by nannies in a family room. Etihad Chauffeur: Etihad Chauffeur is a premium limousine service that creates a unique door-to-door experience for Diamond First Class and Pearl Business Class guests, with

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personal chauffeurs available at 28 Etihad destinations in 16 countries. In Abu Dhabi, the airline offers a dedicated lounge for those passengers using the Etihad Chauffeur service. Luxury coach service: Etihad’s Coral Economy Class guests can enjoy complimentary luxury coach transportation between Abu Dhabi International Airport Sheikh Zayed Road in Dubai, Dubai Marina or Al Ain. Online check-in: Guests can save time by checking in online from 24 hours to two hours before departure. Guests can check-in, choose their preferred seats and print their own boarding pass to present upon arrival at the Bag Drop counter at the airport. Check-in, Dubai terminal: A terminal check-in in downtown Dubai allows Etihad guests the opportunity to check in six to 24 hours before a flight, check their baggage and travel to Abu Dhabi airport via luxury coaches. Check-in, Abu Dhabi Airport: Etihad provides porter and concierge facilities and a separate check-in desk with spacious surrounds for First Class and Business Class guests, as well as Etihad Guest Gold cardholders. For Economy Class passengers, Etihad offers dedicated check-in areas for families and Etihad Guest Silver cardholders. Priority boarding: Diamond First Class, Pearl Business Class and Etihad Guest Gold cardholders can take advantage of priority boarding. An exclusive fast-track service is available for First and Business Class passengers arriving into and leaving Abu Dhabi, as well as a number of other destinations worldwide. Rare capabilities Rare capabilities are capabilities that few competitors possess. Etihad Airways has opened its first dedicated premium lounge outside the UAE in Frankfurt, Germany. The new lounge is a significant milestone in Etihad’s development and a step forward in the airline’s commitment to deliver products and services of the highest possible standards. The luxurious lounge opens three hours prior to the departure of Etihad Airways flights, giving passengers an ideal opportunity to relax in style. Offering 5-star dining and range of entertainment options. The lounge in Frankfurt will be followed by others in international markets, including Terminal 4 at London Heathrow, where Etihad relocates to at the end of September 2009. 88

Lounge service for Families Etihad has extended its services for premium passengers who depart from or transit through Abu Dhabi airport with the introduction of specially trained nannies in its lounges in Terminal 3.The nannies meet and greet parents and children at the lounge entrance before taking them to the family room with their parents consent. There, the children can play with the toys, read books and watch television all under supervision of the nannies who have professional training in childcare and first aid. “Your car is waiting…” service Passengers travelling with Etihad in first or business class will soon be able to book their limousine service online using etihadairways.com It is a complimentary service, which collects passengers from their door and brings them to the airport, where someone will be waiting t escort passengers to the premium check-in. Costly to imitate capabilities Etihad Airways has redefined luxury air travel with its new first class suite. The new cabin contains12 individual suites, designed to provide first class customers with more privacy, greater comfort and increased storage.The highlight of the US $70 million (Dh 257 million) first class revamp is an extra large seat that extends to a fully-flat bed. The full roll-out of the new first class suites in the airline’s fleet is expected to be completed by the end of 2010. Highlights of • 82 inches long private suite with a 80.5 inches fully flat bed, with bed width of 29.75 inches

• Each suite with Arabic styled sliding privacy doors • 23 inch personal TV/video screen, with in-flight entertainment system that allows customers to pause, stop, fast-forward or rewind up to 600 hours of films, TV and radio programmes and play games• Personal beverage compartment • Illuminated wardrobe with a personal mirror• In-seat massager, lumbar support and adjustable headrest• Spacious compartment areas where customers can stow their belongings• Poltrona Frau leather upholstery

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• Extra large (24 inches by 25 inches) wood finished meal table• In-seat power sockets for PCs, iPod connector, USB ports, Ethernet port and audio jack • Luxury changing room with full length mirror, raised wash basin and leather fold-down seat • Luxurious soft furnishings and designer amenity kits Non-substitutable capabilities Non-substitutable capabilities are capabilities that do not have strategic equivalents. Etihad sponsorship of specific sports event as well as sports organization is their nonsubstitutable capabilities, it gives the airline long lasting great global exposure and to potential.

COMPETITIVE ADVANTAGE A competitive advantage exists when an organization has a significant edge over the competition. It means that Etihad airline can do something competitors cannot do or has something competitors lack. Etihad has to develop its resources, capabilities and service products in order to win this difficult competition of airline industry. Etihad, being the youngest airline comparing to the existing competitors, which are Emirates, Qatar and Fly Dubai, even though this makes it is very hard for Etihad to gain competitive advantage over its competitors, but Etihad can manage to hold some competitive advantages that made Etihad Airways has received over 30 awards since its inauguration in 2003. Etihad, as being the national airline of UAE, has to keep its pace with the competitors and maintain high competitive advantages over the rivals. Its competitive advantage is the competence of Etihad to leave behind its competitors as Etihad manage to provide products and services that matches people’s need more than what its competitors can afford to provide. Because of its advantage over all its rivals, Etihad has been growing very fast, or we can say, the fastest commercial aviation in history with the tagline of “From Abu Dhabi to the world”. Even though Etihad is surrounded by many direct competitors in UAE, such as Emirates, Air Arabia and Fly Dubai, Etihad can still managed to stay in the front line among all the others in the Middle East. The main competitive advantages of Etihad airline are Products and Services, Quality and Route System.

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Products and Services In the hospitality and service industry, the quality of products and services are very important in gaining the competitive advantage. For the last couple of years, Etihad has been trying to improve its products to suits more with today’s people’s need and provide them with over expected service in-flight. Etihad tries to maintain its quality of its product services, thus they aim to provide the most comfort to the passengers. In the First class and the Business class, Etihad provide them with the new suites called the ‘next generation seating’ and in the Economic class they launched Panasonic eX2 In-Flight Entertainment system in all the seats. Panasonic eX2 is the most advanced IFE system in service operation today. There is no other IFE system that can match its performance. Panasonic eX2 provides high value media content capacity as well as Audio Video on Demand (AVOD) at every seat, to make sure passengers will enjoy their time on board with most entertaining experience. Not only for First class and business class, Economic class also gets to access live news, use USB file sharing and send text messages and emails. This makes Etihad airways very outstanding from competitor, with its new technology and designs within the aircrafts.

Quality Etihad Airways considered service quality to be the most important thing to become successful in the business. The service Etihad provides to its customers is the highest global standard only. By travelling with Etihad, customers will experience the best of Arabian hospitality onboard. Etihad Airways targets customers who seek to fly comfortably and relaxingly on a luxurious hospitality service. According to the customer service quality bench marking study done by Ethos Consultancy, Etihad Airways scored 91.5% in terms of customer satisfaction in 2010. Also in 2012, Etihad was the winner of the Air Transport World’s Passenger Service Award and was well known as the carrier’s excellent customer service products and offerings of a premium service. Service of Etihad is the combination of the best hospitality on flight with comfortable environment provided by the well-selected Etihad employees from more than 120 countries around the world.

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Partnership and alliance: Etihad currently has codeshare partnership with 43 carriers. Etihad has emerged as a leader in building up partnerships outside the main global alliances. Etihad’s partnerships and alliances grows very quickly and parallel with the partnership strategy, Etihad is building its own operation by opening up another 8 new routes in 2014 from Abu Dhabi. The destinations will be the US cites of Los Angeles and Dallas Fort Worth, European gateway of Zurich and Rome, Perth in Western Australia, Jaipur in India, Medina in Saudi Arabia and Yerevan in Armenia. And in order to support the rapid growth of the business, Etihad will have 20 more new aircrafts to come in 2014 including their very first airbus A380 superjumbo and Boeing 787-9 Dreamliners. Also another 5 Boeing 777-200LR aircrafts will be bought from India to help support Etihad to have enough aircrafts to fly its customers around the world To conclude, Etihad airline has its own strong competitive advantages that helps them to stay as one of the most well-known airline in the Middle east and also in the world. Etihad cannot stay still and always try to walk one step ahead of the competitors. Etihad believes that the exclusive Arabian service it provides and the products it use for the customers can create customer value for its organization, which makes Etihad a successful airline industry.

VALUE CHAIN ANALYSIS In the operation of a business, deals with a lot of activities and all of them have their own costs one way or the other. The company must create value in its products and services to cover up its costs. Value Chain Analysis in the business is how do you change business inputs into business outputs in such a way that they have a greater value than the original cost of creating those outputs? It includes sets of activities that an organization carries out to create value for its customers. The value that's created and captured by a business is the profit margin. If the Value that the organization create and captured is more than the Cost of creating that Value, it turns out to be the Profit Margin for the organization. The more value an organization creates, the more profitable it is likely to be. And when the organization can provide more value to its customers, it also builds Competitive Advantage over its competitors. Value can b measured by product performance characteristics and Product attributes for which customers are willing to pay. Influential work by Michael Porter suggested that the activities of a business could be grouped under two headings:

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1.

Primary Activities- are the activities that directly concerned with creating and

delivering a product in the business. The activities involved in the development, production, sale, and distribution of an organization's products and services to its customers and after sale support. They consist of the following: •

Inbound logistics – These are all the processes related to receiving, storing, and

distributing inputs internally. The supplier relationships are a key factor in creating value here. •

Operations – These are the transformation activities that change inputs into outputs

that are sold to customers. Here, the organization’s operational systems create value. •

Outbound logistics – These activities deliver the product or service to the customer.

These are things like collection, storage, and distribution systems, and they may be internal or external to the organization. •

Marketing and sales – These are the processes the organization use to persuade clients

to purchase from you instead of your competitors. The benefits you offer, and how well you communicate them, are sources of value here. •

Service – These are the activities related to maintaining the value of the organization’s

product or service to its customers, once it's been purchased. 2.

Support Activities, unlike Primary Activities, Support Activities are not directly

involved in production, may increase effectiveness or efficiency. It is rare for a business to undertake all primary and support activities. It is the activities that sustain primary activities and other support activities of a business. Companies use these primary and support activities as "building blocks" to create a valuable product or service. •

Procurement (purchasing) – This is what the organization does to get the resources it

needs to operate. This includes finding vendors and negotiating best prices. •

Human resource management – This is how well the organization recruits, hires,

trains, motivates, rewards, and retains its workers. People are a significant source of value, so businesses can create a clear advantage with good HR practices. •

Technological development – These activities relate to managing and processing

information, as well as protecting a company's knowledge base. Minimizing information

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technology costs, staying current with technological advances, and maintaining technical excellence are sources of value creation. •

Infrastructure – These are a company's support systems, and the functions that allow it

to maintain daily operations. Accounting, legal, administrative, and general management are examples of necessary infrastructure that businesses can use to their advantage.

As a matter of facts, the characteristics of hotel products come in the different features from ordinary products. This is where problems arise. Normally, products in the other markets are tangible that tend to follow the two categories of business activities, primary and supporting activities. But in the service industry, the main products are intangible, and that is service. As a result, the value chain of intangible product might use different approaches to the analysis. According to a research on New Dimension of Porter’s Value Chain published in the IMS international journal in 2006, the value chain for services are explored to five attributes of 94

primary activities and four attributes of supporting activities which will be further clarified as following:

Primary Attributes of Value Chain for Services:

1. Service Design 2. Knowledge Management 3. Delivery Systems Management 4. Moment of Truth Management 5. Service Competition Management

Supporting Attributes are:

1. People (Human Resource Management) 2. Process Information 3. Physical Aspects 4. Punctuality and Reliability

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Primary activities 1. Service competition For Etihad, the most important activity is the Service competition. High service competition gives Etihad competitive advantages over its competitors. Every business has competitors all around. As we know, Etihad is a young airline comparing to its existing competitors. It is very difficult for Etihad to compete with the competitors and leave them behind. But Etihad has got many of its own services that give it competitive advantages.

For the ground product offerings of Etihad, all Economy class passengers have free access to Wifi Internet, printing, luggage storage, family lounge, and prayer rooms at Etihad Terminal Abu Dhabi. And in order to ensures that its customers who travel to the Far East countries will receive some privilege for being the customer of Etihad as well. They will have unlimited access to the First and Business class lounge in every major cities’ airport in China, Indonesia, Malaysia and Thailand. Especially in Thailand, which Bangkok was the first long haul destinations in Far East countries, Etihad focus a lot on Thai market segment. After its seventh year of flying this route from Abu Dhabi to Bangkok, Etihad introduced its regional Thai language website to help Thai customers to access to its service faster and easier.

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Some more additional services that Etihad provide to its passengers are:

VIP Services: Customers are given the royal treatment with personalized itineraries, concierge services, restaurant reservations, and event tickets and more. The VIP members of Etihad are treated with a premium level of service.

Etihad Express Coach Service If you're traveling to or from Dubai or Al Ain, we have a fleet of luxury coaches designed to offer the same service and comfort that we offer on our aircraft.

This coach service provides the airline’s Coral Economy Class guests with complimentary luxury coach transportation between Abu Dhabi International Airport and Etihad Travel Mall in downtown Dubai, Dubai Marina or Al Ain. The fleet of Mercedes-Benz coaches is equipped with elegant interiors, ergonomically-designed seats, climate-control, an entertainment system and high-resolution 14-inch monitors. Online check-in: Guests can save time by checking in online from 24 hours to two hours before departure. Guests can check-in, choose their preferred seats and print their own boarding pass to present upon arrival at the Bag Drop counter at the airport.

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Check-in, Dubai terminal: A terminal check-in in downtown Dubai allows Etihad guests the opportunity to check in six to 24 hours before a flight, check their baggage and travel to Abu Dhabi airport via luxury coaches. Check-in, Abu Dhabi Airport: Etihad provides porter and concierge facilities and a separate check-in desk with spacious surrounds for First Class and Business Class guests, as well as Etihad Guest Gold cardholders. For Economy Class passengers, Etihad offers dedicated check-in areas for families and Etihad Guest Silver cardholders.

Priority boarding: Diamond First Class, Pearl Business Class and Etihad Guest Gold cardholders can take advantage of priority boarding. An exclusive fast-track service is available for First and Business Class passengers arriving into and leaving Abu Dhabi, as well as a number of other destinations worldwide. 2. Knowledge management The second most important activity for Etihad airline is Knowledge management. It is to gain useful information’s for the organization, especially the information about the

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customers need. Knowledge management relies heavily on the ability to understand and know how to provide service to customers in such a way that would satisfy the customers. If Etihad knows what its customers expect from the airline, it can provide more than what customers expect in order to exceed the customers expectations, which will also adds more value to the company and further more gain the Competitive Advantage for the company. To create a competitive advantage requires developing and leveraging organizational knowledge of both the internal and external environments and the various levels within the organization.

Most of the countries in the Middle East are Islamic countries and therefore Etihad’s passenger who travels Etihad Terminal in Abu Dhabi; passengers are given with big prayer rooms for men and women to pray when they need to do their prayers. Etihad itself is a Middle East airline, and UAE is in the center between Western countries and Eastern countries. Etihad faces very diverse market of customers. Therefore, Etihad also employs a very diverse workforce to cope with its market. The airline has spent great amount of money and time on training the staff to ensure its professionalism while providing service to multi culture passengers onboard. The Human Resource department has to put great effort in educating staff to help giving them positive recognition as being professional staff in service industry. Airline business has to deal with passengers from every country all over the world. Passengers travelling with Etihad are multilingual and therefore, Etihad staffs need to be very diverse and also need to be able to communicate not only in Arabic but also English, French etc. The staff of Etihad can improve their communication skill in the training centre Etihad provided.

Etihad focuses on the convenience of its passengers. At Abu Dhabi, the passengers are provided with chauffer service and online check-in service, which is very convenient for those who do not like standing in lines and also online check-in service is very time saving. At the Abu Dhabi airport, Etihad has its own terminal, which helps to save time even more for luggage transferring and picking up.

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3. Service design

Before any service provider can provide their services, they need to design their service first. The service provider must know what they need and be clear of the vision and mission of the company. Also the service provider needs to be very sure that the service and products has enough value in order to make customers buy it from them. This is an important activity in the value chain. Once there is poor design, we can be sure that there will be customer dissatisfaction. Designing a service is complicated unlike designing a non-service product. In order to design a service product, one needs to understand the nature of the target market and how sensitive are customers to the quality compared to price. Not every customer will like the same kind of service. Each service provider organization must create its own service design to be different from its competitors. Etihad needs to study its customers and develop is service according to the customers need and not what the organization need. Hence, service design is like planning how to deliver the right service to the right customer and the design work according to customer’s demand. 4. Delivery system management It is basically the management of how do you deliver you your own uniqueness to customers and how to make them perceive the value in your service. It is truly important for the organization to have a consistent service delivery management to guide service provider to follow the same standards. Etihad is a luxurious airline that comes with reasonable price. By traveling with Etihad, as it is an Arabian airline and seen as the representative of UAE national airline, Etihad had to make sure to provide a prestigious Arabian culture and heritage to its passengers who are the customers. During the long distance flights Etihad serves hot beverages, multiple course meals and also hot desert. In the flight to Japan, Etihad launched Japanese in-flight service with traditional Kaiseki menu for Japanese dinning, including Sake, Japanese tea and Asahi beer onboard. Also in all flights to Seoul, Korea, the menu in the flight will be changed to Korean menu instead, in order to make the Korean passengers feel more comfortable in-flight.

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5. Moment of truth management A moment of Truth occurs when a customer comes in contact or interacts with the service provider and experiences their level of quality. It is a very important moment that can change all the outcome of the service of the organization. A positive moment of truth with customer is a good sign to have surely satisfied the customers. But a negative moment of truth causes dissatisfied to customers who will look for the alternative chooses to travel with the other airlines that can match their needs. Moment of truth plays a very important role of maintaining good reputation of the company. Etihad has been doing great jobs all this time. Along with the help of the other facilities that the airline provides to its passengers for their convenience, according to the customer service quality bench marking study done by Ethos Consultancy, Etihad Airways scored 91.5% in terms of customer satisfaction in 2010.

Supporting activities

1. People (HRM) For Supporting Activities, Etihad believe that people is its most valuable key successes, therefore Etihad select its cabin crew very carefully with its own unique way of selecting and training its people to become the best in the industry, which also gained them the award winning cabin crew title. Etihad believe that as long as its can keep the employees happy, they can be sure the employees will treat the customers very well with happy faces as well. Therefore, all the cabin crews and pilots of Etihad will get to travel around the world by allowing them to visit every destination they go, so they can relax themselves and come back to work happily. Etihad provided 1st in industry in-flight chef for the First and Business class. Etihad employs more than 9,000 staff which representing more than 120 nationalities from around the world. The airline is also committed to pioneering opportunities for the UAE’s national population, and through its Emiratisation Program, offers a wide range of training opportunities for Emiratis, including a cadet pilot scheme, a technical engineering development program and a graduate management development program. Etihad also opened the aviation academy in Abu Dhabi in order to make sure they can provide their staff with special trainings for both skills at works and good personality to be the best service provider in its field. 101

The people Etihad seeks are those who can relate to the vision to be the best airline in the world and bring to life its five corporate values.

Those 5 values are: • Acting positively: to be open, honest, and supportive in all that you do. • Caring about detail: to anticipate guest needs, “Get it right”, and always be consistent. • Taking responsibility: to take initiative, be proactive and persistent. • Delivering best practice: to always be “Safety aware”, efficient and strive to be better. • Inspiring our customers: to be passionate, caring and inspirational.

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The following table gives the staff numbers for the top 20 largest national groups working at Etihad Airways in December 2011.

The following table gives a breakdown of how the workforce is made up by regional grouping in December 2011.

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The following table gives a breakdown of how the workforce is made up by divisional grouping in December 2011.

The biggest division in the organization goes to the airline’s Operations Department, which includes pilots and cabin crew. It employs more than 6,230 people.

HR operations Etihad’s Human Resources department has evolved considerably ever since the organization has established. The Human Resource department was the one that mainly responsible for issuing company work visas and administrative matters but not the job has become o challenging for Human Resource department. It plays a key role in the strategy of company and staff development. Etihad has plan and predicted its future market in 2020 to have been flying more than 25 million passengers and to fly to more than 100 destinations 104

aboard a fleet of 150 planes. In order to meet its goal, Etihad will need a workforce of approximately 22,000 people. The growing number of employees drove a significant increase in employee administration, necessitating a continuing focus on automation and bureaucracy. Self service functions for employees and managers in HR’s online system called ‘iserve’ increased by a further 71% and the new Employee Services intranet site provides employees with a one-stop shop for information on many employee policies and procedures. 98% of all email employee queries were responded to within defined service level agreements.

2. Physical aspects

Physical aspects are everything about Etihad that customers can see and if they are impressed with what they see, that means the physical aspects of the organization is well managed. Etihad tries to present itself as an Arab heritage airline and giving the customers the best of Arabic hospitality service. The facilities inside the air crafts are useful and convenience. Passengers onboard get to access live news, use USB file sharing and send text messages and emails. The Panasonic eX2 In-Flight Entertainment system shows how much Etihad concerned about its customers’ needs.Physical aspect as well means customer service. Etihad also has strength at customer service.

Service recovery: Etihad Airways is committed to offering its guests a superior customer service, and has a dedicated team in place to manage customer relations before and after a customer travels with Etihad Airways, divided into ‘Guest Affairs’ and the airline’s ‘CARE unit.’

Etihad Airways understands that a customer’s travel experience with Etihad Airways sometimes does not live up to their expectations. When this occurs, the airline’s Guest Affairs department will do everything possible to respond to complaints appropriately, in a timely and empathetic manner.

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The CARE unit is set up specifically to proactively manage customer service issues, at Abu Dhabi international airport, and is called upon to assist at other outstations for some issues. The unit provides support to the ground staff in the event of a disruption, or to a guest when an issue occurs; for example if the guest has a problem at check-in.

3. Punctuality and Reliability

Punctuality and Reliability of the organization reflects the management and the quality of the organization. The organization that has the least error with few customers complains tends to be successful in business. Time is valuable. And for the business people, every minute is important. If Etihad causes some faults or delay in flight schedules, it would surely loss its reputation and also would cause weakness to the organization. Etihad has to run its flight on schedule to show its professionalism it operating airline business and if Etihad is always flying on time and never cause any mistakes during operation, it would give Etihad a much higher competitive advantage over its competitors. Once the customers are satisfied with the service of one service provide and the service provider can afford to provide the same quality service every time, the customers will be loyal to the organization and will continue using the service of Etihad every time he or she travels.

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In 2011, Etihad received a Punctuality Award Long-haul Airline - Brussels Airport Aviation Awards

4. Process Information Last but not the least important of supporting activities, every big industry today is using Information Technology to help them manage information easier and faster. IT and telecommunication services help to connect service provide to customers without having to meet each other. For example, the website for Etihad that is also available in Thai, makes it very convenience for Thai customers to get any information they want from online and as well as book the tickets. Etihad has a mass number of passengers and another 9000 workforce to be responsible. Etihad has secured strategic partnerships with some of the world’s leading suppliers including Amadeus, SITA, SABRE, Lufthansa Systems, Oracle and Microsoft.

Sabre Airline Solutions:

An activity of significant impact for the entire company in 2011 was the selection of Sabre Airline Solutions to supply Etihad Airways’ passenger services solution (PSS), eCommerce, and departure control system (DCS). Almost all operational and business areas. The deal with Sabre was worth more than a billion dollars at list prices and will be the biggest technology innovation Etihad Airways will undertake in the next ten years.

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IMPORTANT ENVIRONMENTS THAT ETIHAD NEEDS TO BE AWARE OF: 3 important segments of the external environment: 1) Technological and physical segment These two segments are clubbed together because they go hand in hand. By technology we refer to the new aircraft models, new technological demands; and by physical we refer to the environmental damage airlines do, and the growth of bio fuels for future generations. For airlines, technology has always been and will be their most important segment. This is because technology and the airlines are directly proportional to each other. They both depend and rely on each other. Technology can help an airline reduce costs in terms of fuel efficiency and consumption but on the other hand airline technology does not come cheap and it still will pollute the environment no matter what. Etihad must be aware of these two segment because the fossil fuels (whom airlines are very much dependent on) are depleting in today’s world and therefore alternative solutions required. Oil prices are becoming higher at the same time. However there are better aircraft models coming out which help reduce fuel consumption and are environment friendly, but this is not the solution. The solution is investing and developing bio fuels so that there is less environmental footprint and dependency on fossil fuels. Also it will show Etihad’s commitment to the environment as stated in their vision and mission. 2) Economic segment The second segment that Etihad must be aware of is the economic segment. Countries in MENA are undergoing political crisis which is also known as the ‘Arab Spring’; while Europe has been recovering from its own economic crisis. These political crisis in MENA are affecting the economic growth of the countries in those regions. This is indirectly affecting Etihad because nobody wants to travel to those places anymore. Tourism is down as well. Therefore the economic segment is important to Etihad because it affects their revenue. They must keep up to date with the latest news and strategize their plans accordingly because MENA and Europe are the first 2 target markets, therefore they cannot afford not to capitalize on these regions. INTERNAL ENVIRONMENT: Three main Internal Environment factor which Etihad is doing well and should focus on. Firstly I would say Etihad’s strength of their research and development is very interesting and unique. Etihad is in efforts to alleviate current fossil fuel crisis Etihad 108

and Boeing airlines has combined efforts to create a new avenue of fuel source, biofuel. Abu Dhabi program was initiated to underline this effort. If the research and development succeed, Etihad will be able to gain more revenue from lower cost of energy source and showing to the world that they care about environment, not just “saying” but “doing”. Many companies tries to have an image of concerning to the environment and Etihad is one of the few companies who is committed and taking the issue seriously. Etihad’s Distribution would also be one of its strength; they have been building a strong system. Etihad puts great effort in producing products with awareness to the customer’s needs as well as graphical markers of each market. Which is to in turn comply with different advertisements, loyalty programs as well as sponsorships. Lastly, their innovative resources, sporting sponsorships along with other commercial expansions show at the house from commitment to expanding its innovative resources. As a result of these efforts to improve the services on the airline it has been rewarded with an array of prestigious awards across the world.

ARE THE VISIONS AND MISSIONS CLEAR AND MEASURABLE? After reading the visions and missions of Etihad we can see that the vision of Etihad airline is also closely linked to its Arabian heritage in particular. The vision of the airline is also to become one of the global airliners that exude a truly 21st century, where challenges, and changing environment, plus an engaging vision to break the convention, constitutes its deep rooted vision. Etihad Airways mission like any 109

considerate corporate is to “give a refreshing welcoming to their guest, where travel should be safe and secure in an environment that is friendly, and where global standards in both terms is practiced, be it hospitality or in the technical aspects in assuring a safe journey for its guests.” However the vision and mission are not clear and measurable in the environmental aspect. Etihad has been slow in its commitment to the environment and do only what is minimally required, that is follow the code of IATA. However they have not gone out of their way to make sure they are environment friendly and conscious as a company. There are no activities or practices highlighted in their main services which shows they are genuinely interested in the environment. The only activities they do are buying better planes, and practicing fuel efficiency, coupled with minor environmental practices that may be practiced on board. What is interesting is that their commitment to change the conventions of the airline industry and deliver Arabian hospitality is very clear and measurable. Etihad is known to be the fastest growing airline in the world, are already under the umbrella of the big 3. They display Arabian hospitality through their services and values, which can be measured through the various awards they have received over the years. Their fleet is increasing rapidly and recently they put an order of $25.2 billion from Boeing. That was statement of intent that Etihad only wants to grow further. Also their economic situation and development since the start of the company indicates that Etihad really do want to challenge globally and be the best airline. Therefore to conclude I would say that their vision and mission on being the best airline and delivering Arabian hospitality is clear and measurable to a certain extent, but on an environmental basis more work needs to be done in order to match your statement.

REFERENCES •

Business dictionary, n.d. External environment. Retrieved from

http://www.businessdictionary.com/definition/external-environment.html •

MENA, n.d. Population size. Retrieved from http://data.worldbank.org/region/MNA

•

Eurostat, n.d. European population compared with world population. Retrieved from

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•

Academia, n.d. European inequalities. Retrieved from

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